If you can't beat Buffett, join him

Instead of trying to outdo the Oracle of Omaha's track record, you can simply invest alongside him.

By TheStockAdvisors Aug 21, 2013 11:13AM

File photo of Warren Buffet in April 2011 (© Rick Wilking/Newscom/Reuters)By Ian Wyatt, $100k Portfolio


A number of blue-chip stocks such as Wells Fargo (WFC), American Express (AXP) and DirecTV (DTV) have managed to outperform the market. By owning shares of Berkshire Hathaway (BRK.B), you essentially own a slice of all those stocks.


Since Buffett took control of the former textile company in 1965, Berkshire Hathaway has grown its book value by an average of nearly 20% a year. That's more than double the 9.4% annualized return of the S&P 500 ($INX) during that time.


In a nutshell, Buffett and his business partner Charlie Munger have the best long-term investment track record in the world.


Berkshire Hathaway's outstanding track record is the reason I added the stock to our portfolio back in March 2011. "Why try to beat Warren Buffett when you can invest with him?" I reasoned then.


So far, the stock hasn't disappointed. It's up 47% in less than two and a half years. Given Berkshire's historical track record of close to 20% annual returns, that's essentially par for the course.


That performance is likely to continue in the years ahead, even after Buffett is no longer running the company.


Berkshire Hathaway is sitting on a mountain of cash. In the last year, the company generated cash flow of $12.5 billion. That means more than $1 billion in positive cash is flowing into Omaha every month.


The company's balance sheet is cash rich too. Berkshire already has $44 billion in cash and $31 billion in bonds. With a stockpile of nearly $75 billion, Berkshire is highly liquid and prepared to make big acquisitions.


The company doesn't issue a dividend, and probably never will -- at least not while Buffett is the CEO. Buffett has been adamant over the years that he prefers to save his cash for acquisitions and individual stocks. Berkshire does, however, issue occasional stock buybacks.


The next time that happens, it could be a windfall for an already thriving stock. The last time Berkshire Hathaway offered to buy back a substantial amount of stock was September 2011. Within a month, the stock was up 21%.


Even if Buffett decides not to repurchase shares, however, Berkshire is well positioned to continue achieving market-beating returns in the coming years.


For one, the company could instead use its cash for a new acquisition. Buffett already made one major purchase earlier this year, acquiring Heinz for $23 billion back in February.


Above all, Berkshire's investment track record is probably the best reason to add the company to your portfolio. You don't double market returns for half a century by accident. It takes a truly brilliant investment mind like Buffett's to achieve those returns with such consistency.


Buffett has built Berkshire into something quite unique. It's a lean, agile company that owns outright hundreds of the best businesses, big and small. Plus, it has a diverse investment portfolio of some of the best individual stocks and bonds money can buy.


But you don't have to buy them yourself. By simply buying shares of Berkshire Hathaway, you gain access to many of America's best companies in one fell swoop. The stock has been a big winner for us already, and I expect that performance to continue in the years ahead.


More from TheStockAdvisors.com

28Comments
Aug 21, 2013 12:14PM
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People who have owned his stock long term are millionaires.He`s 82.Wall street hates

honest people like him.For 30 years they`ve been saying "he`s too old"Who says you can`t

pick good stocks at 90?It`s not basketball.

Aug 21, 2013 1:56PM
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I don't usually beat the drum for Warren and Charlie...I just have respect for them in certain ways.

 

If you must downgrade them DO SO....But to me, you only look the FOOL that you are.

 

Buffet, Munger and Berkshire have made "countless others" very rich.

It's taken him/them 50-60 years to build what they have, from somewhat humble beginnings.

Buffet is very well off, so are most of his children..

Buffet and probably Munger along with Berkshire has given Millions to Charities.

And Warren Buffet is going to give the "bulk of his estate" 85-95% to Charity upon his death..

I don't believe there is any ulterior motive, or trying to buy his way to anyplace..

I think that makes them "notable, and respectable"....

And I like the guys for it.

Aug 21, 2013 2:52PM
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Actually, it is a really good time to invest in BRK/B shares, they are off their high last 2 weeks of $119.00 down as low as $113.52 today. Most people do not realize just how the market has changed in the last 10-15 years. Investing in Berkshire is like investing in a well run mutual fund, except without all the hype.
 
Warren has had a great career and has nothing to be ashamed of, actually his is quite thrifty, compared to other financial titans that love to "show off" their wealth. He has saved 10's of thousands of workers their jobs in companies that were in financial trouble, he has donated over a billion dollars to various charities, and when most people diagnosed with cancer would have just given up, he put his nose to the grindstone and worked even harder.

With the banks paying less than 1% in interest, bonds are in  the toilet and all of the banking and hedge fund scams around, I decided to place a large part of my nest egg into Berkshire. It is the wise thing for me and my family to do in preparation for our retirement.

A very wise man once told me, the proof is in the results, not just today, but everyday for a long time!
Aug 21, 2013 12:39PM
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Honest people wouldn't accept the B/C that Wall Street uses to persuade investors into buying and selling their stocks! I'm not saying that investors are not honest, but they let the almighty dollar bill dictate and run their life!  I would say they don't know what their priorities should be!!!
Aug 21, 2013 4:07PM
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i bet that they are not in a 401k  in 2008  they  lost nothing  but  you lost better then  half your  401k  why  because they have access to there  money by the  min.  you can't  put your  money into  what they  can. insider  trading at its  best Buffet bought  BOA stock one day  because it was  going  down  fast  5 million  worth  at  2of  3 dollars  a share  next  day it was going for 1 or 2 dollars  more  per  share  not bad money  for one  day.  manipulation  billionaires  and some  millionaries  have that  much  power 

Aug 21, 2013 5:49PM
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Warren Buffett must be a damn psychic! He just does one smart investment after another, after another...

Aug 21, 2013 12:20PM
Aug 21, 2013 4:01PM
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Planning....Very good points and Good luck with Berk.B.
Aug 22, 2013 1:17AM
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There seems to be a few people that don't quite understand Buffet's strategies. He bought Heinz and took it private, the only way to enjoy any of the success of that company now is to own Berkshire stock. The company is no longer at the mercy of the market, because it is owned by Berkshire. It seems like a few of you do not understand why a company is offered for trade to the public, it is to raise capitol, or use other people's money! Buffet has approximately 90 billion liquid in cash and securities, thus giving him a very large checkbook to buy more companies and take them private as well, this is what makes Berkshire so attractive to investors. All of the long term appreciation with very little risk because he owns many different companies. Or in others words, he hasn't placed all your eggs in one basket! Being a success is an admirable quality, not shameful.
Aug 21, 2013 10:08PM
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Just goes to show that you can be the best in the world and still not be beyond criticism and insult. It would be easy to bet that these naysayers never invested with this golden pair or if they did they foolishly were in for only a short term. Instead they are probably invested with thieving brokerages and their 401K's or with the government in IRAs where the government can change the rules at any time and you are stuck.
Aug 21, 2013 12:11PM
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 stuck in the 20th Century? No kidding, how do you like paying $75 a month for TV while your wages are going down to nothing. The 21st century has been really great with all the toys for monkeys to use so  they can receive their feedings 2-3 times a day from their socialist government. Oh, and social networking allows those monkeys to send dumb pictures of their little monkeys to all their monkey friends. Yep, Buffett is really stuck isn't he.
Aug 21, 2013 6:47PM
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Well... ZEEBART, Berkshire actually lost more then we did, percentage wise. In 2008-09.

 

Dollar amount I can't remember now?....I like to CROW about that, one of my few feathers.

But he/they recovered also much like us, we were made good by July 23-25th 2009.Them later I think....They stayed the course and reallocated...re-adjusted, etc.... So did we.

 

That's one of the important investment strategies I have garnered from Buffet..

Never read any books about him or invested in any kind of Berkshire A or B.

Some days wish we had.

I've read articles and short stories, about him and Munger along with Berk, fairly often.

And some of our investments are very similar to theirs.

Aug 21, 2013 11:37AM
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No one and nothing left to believe in for the truth. Used home sales are UP... but last week, Goldman Sachs revealed 50% of those sales were cash purchases. That would suggest that investors and foreigners with unverified funds are the buyers, not Americans- because 90 million of us are under and un-employed. With $85 billion going into the likes of JP Morgan Chase... a bank with hundreds of law cases against it and Bank of America- who has interns working 72 hours straight until they drop dead taking a shower... and all of that $85 billion going to prop up the stocks of business platforms that won't hire full time or pay family sustaining wages except to alumni... the TRUTH is... that America is dying, choked by greed, corruption, paper and button pushers and law firms. THANK YOU to those liquidating stock positions... and F Off And Die to those who feel it's your God-given Right to harm the rest of us through financial tyranny.
Aug 21, 2013 6:52PM
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I don't know of any 401Ks that offered Berkshire stock in the past..

Maybe some offer the BERK/B shares today....Don't know.?

 

And I'm sure it's possible that employees within the Berkshire group have it offered to them.

Maybe even in 401 plans.??

Aug 21, 2013 12:06PM
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Now would probably not be a very good time to buy Berkshire Hathaway.
Aug 21, 2013 3:50PM
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Who could loose owning four insurance companies? If any one of them is headed for red, they simply raise rates until Buffet profits again. He is no genius. ©2013 Credit: Doktor Thomas.
Aug 21, 2013 11:40AM
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Investing with Buffett...

 

That's putting your good money with somebody who wears Depends and is stuck in the 20th Century. No thanks... I'll keep mine in the 21st Century and as far from organized financial tyranny as I can.

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