Investment guru Warren Buffett, who turns 93 on Wednesday, has appealed to a new generation of investors with his portfolio approach to investing in value stocks.
The Man, Myth & Legend: The nonagenarian heads the investment holding company Berkshire Hathaway, Inc. BRK BRK in the dual role of chairman and CEO. The company has a portfolio of subsidiary companies engaged in diverse businesses as well as stakes in companies.
Born to a stock broker in Omaha, Buffett took inspiration from his father, who reportedly introduced him to investing and books. The legendary investor had his first tryst with investing at a very early age of 11 years and pocketed a small profit out of it.
He, however, was unhappy that he did not hold the investment longer to rake in fatter profits – which apparently taught him the virtue of not being swayed by the overwhelming emotions of "greed and fear" that are characteristic of investing.
Buffett, known as the "Oracle of Omaha," first invested in Berkshire, which was then a struggling textile manufacturer in New Bedford, Massachusetts. He took control of Berkshire in 1965. Although he did not succeed in turning around the textile business, he slowly and steadily developed it as a holding company.
It was around that time Charlie Munger began associating with Buffett before formally joining as vice chairman of Berkshire in 1978. Munger, who is a big fan of renowned value investor Benjamin Graham, tweaked the latter's ideology to buying excellent companies at fair prices and holding on to them.
Standing testimony to the duo's success, Berkshire's Class A shares have soared from around $270 in the early 1980s to over $540,000 currently.
In Berkshire's annual letter to shareholders in February, Buffett said the company's satisfactory performance over the years has been due to a dozen "truly good decisions," which he said could be made once every five years, and the forgotten advantage that favors long-term investors.
See Also: Best Value Stocks
Berkshire's Top Equity Bets: About 78% of Berkshire’s aggregate fair value of equity investments were concentrated in five companies at the end of the second quarter.
At the end of the second quarter, the fair values of these investments were as follows:
- Apple, Inc. AAPL: $177.6 billion
- Bank of America Corp: BAC: $29.6 billion
- American Express Co. AXP: $26.4 billion
- Coca-Cola Co. KO: $24.1 billion
- Chevron Corp. CVX: $19.4 billion
A hypothetical equal-weighted investment of an aggregate of $1,000 in these companies at the end of 2022 would be worth:
- Apple: $283.41
- BofA: $176.15
- Amex: $216.91
- Coca-Cola: $190.22
- Chevron: $178.23
The cumulative return in absolute dollars is $1,044.92, a return of 4.5% over a period of six months. This compares to the S&P 500's 17.14% return.
The returns take into account only stock price appreciation. These companies have been consistent dividend payers and if the dividend streams paid out thrice this year were also accounted for, the returns would have been even greater. For instance, Berkshire is likely to have earned $219.74 million in dividend income from Apple alone following the payout the tech giant announced in the June quarter.
In premarket trading, Berkshire's Class A shares were edging down 0,29% at $542,000, according to Benzinga Pro data.
Image generated using AI via Midjourney
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
