July 2024 Newsletter

WARREN BUFFETT?

At 6 years old Warren was working selling gum and Coca Cola door to door. By the time he was a teenager he had pinball machines in barber shops and a profit-sharing arrangement on a 40-acre farm near Omaha, Nebraska. After college he tried repeatedly to work for Benjamin Graham a British born economist later known as the father of value investing. Failing to land a job with Graham, Warren took a job as a stockbroker working for his father in Omaha. Warren kept sending investment ideas to Benjamin Graham and finally landed a job at his firm in 1954. When Graham retired just 2 years later Warren took his newfound knowledge and started an investment company along with friends and family. By the time Warren was 26 (1956) his net worth was $140,000. In 1962 He plowed almost all his net worth into his investment partnership and by 1964 the investment company was worth 17 million of which Warren owned 1.8 million. 

In 1965 He bought Berkshire Hathaway a textile business and later closed his investment partnership and stopped managing it in 1969. By 1972 at age 43 his net worth was 34 million. The textile business went on a multiyear decline in the U.S. and by 1985 the last of his textile mills was closed. His worst investment became the nameof his mega successful investment firm Berkshire Hathaway.

 

BERKSHIRE HATHAWAY?

Berkshire Hathaway today is worth close to 1 trillion dollars. The holding company owns many businesses and stock in many companies. Warren’s sweet spot was investing in banks and insurance companies. One of his most successful early investments was in a candy company See’s candy in 1972. Over the next 50 years See’s contributed 2 billion in profits to Berkshire’s bottom line. Berkshire never split its A shares. One A share of Berkshire as of the writing is worth about $625,000.

 

BERKSHIRE AND APPLE?

Warren Buffett is one of the most celebrated investors of our time, and for good reason his success is undeniable. His almost 90-year investment experience was almost entirely made up of value investing. He made most of his money during recessions when the stock of good companies was on sale, and even better he made preferred stock deals of 10% or better when times were hard. With these deals he had the option to move the preferred stock to common shares (convertible preferred) when the timing was right. His best and most profitable investment was not until he was 86 years old: Apple. Between 2016 and 2018 Buffett and the company invested 36 billion in Apple stock. Today Apple represents almost 50% of Berkshire’s stock portfolio. Over 70 years of investments and one stock in the last 8 years or so has been his best investment ever. So much so Berkshire has been selling Apple shares because they own too high a percentage in one company and their risk is not being diversified enough.

 

WARREN BUFFETT CHANGED HIS MIND?

Warren Buffett at age 86 finally was convinced that investing in high tech was the right decision. Granted, Apple is not cutting-edge high tech like AI; but it is tech none the less. The lesson for all of us here is that it is never too late to make a good investment even when it is a company or part of the stock market we don’t understand or really want to invest in. Investors must be many things: patient, diversified, and yes open minded about opportunities. Warren Buffett has proven that you are never too old to make a good decision.

 

Thanks, Andy McClung CFP®

Wall Street Journal Gregory Zuckerman ; Finance.Yahoo.com Joel Anderson ; Wiki.org

 

2024 Market Results

S&P 500: +14.5%

Nasdaq Composite: +18.1%

Dow Industrials: +3.8%

Russell 2000: +1%

Dow Global: +7.84%

Source Wall Street Journal  7/1/2024

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