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 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.
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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.
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.
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
Warren Buffett must be a damn psychic! He just does one smart investment after another, after another...
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.
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.??
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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What does the country have to do with the price-to-earnings ratio of the S&P industrials? From here on in, everything.
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