What does the future of Warren Buffett's look like?
Warren Buffett - the legend, the portfolio, recent purchases
How did Warren Buffett react to the corona crisis? What does the portfolio of the most successful investor of all time look like? Here it is - voilà!
Buffett's portfolio by sector
Warren Buffett's portfolio overview / status: end of September 2020, source: warrenbuffettstockportfolio.com
Note: Portfolio does not reflect any changes after cem reporting from 09/30/2020.
Well - that's just the industries for now, as an overview. But what do you see?
- The former high-tech shy Buffett now invests over half of his assets in IT.
- The financial sector makes up a good quarter.
- A good eighth is in basic consumer goods.
- The consumer discretionary and healthcare industries together account for less than a tenth.
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Buffett is invested in these stocks
So three quarters of Buffett's billions are in IT and finance. If a private investor presented you with such a portfolio, you would probably tell him: diversify more!
But it gets even better. What is the weight of the individual companies? Let's look at those with a weighting of over one percent. Anything below that is worth less than two billion dollars per position - so peanuts.
Warren Buffett's Top 13 Investments / As of: End of September 2020, Source: warrenbuffettstockportfolio.com
That's Buffett's 13 big ships. The impression solidifies. Broad dispersion looks different.
- Almost half is invested in Apple. After that, nothing comes for a long time.
- After all, a good tenth is in another value from another sector: Bank of America.
- Buffett's favorite drink, Coca-Cola, and its stock come close to ten percent.
Apple, Bank of America and Coca-Cola make up two-thirds of the portfolio
Those were the top 3. Together a good two thirds of the depot. American Express and Kraft Heinz add up to a good tenth - although Kraft Heinz is not exactly the cannon in the portfolio.
The rest of the big ships are spread over eight companies. Everything below that falls under “also ran”. The pharmaceutical and consumer goods giant Johnson & Johnson accounts for just 0.02 percent in the portfolio, hardly a mere 50 million dollars.
One suspects - Buffett deliberately leaves this open - that the legend now lets his team decide on investments under one billion dollars. Worth more than a billion and thus probably "real" Buffett values in the portfolio are the following:
Warren Buffett's Investments / As of September 2020, Source: warrenbuffettstockportfolio.com
Snowflake at eye level with Mastercard and Amazon
If you look at the weightings, the sensation about Buffett's participation in the cloud start-up Snowflake (0.67 percent) is put into perspective. Quality companies such as Visa and Mastercard rank roughly in the same order of magnitude, as do large pharmaceutical stocks or even Amazon, which is so popular with private investors.
The composition contradicts everything we learn - we normal mortals. Why is that? In short: Buffett doesn't diversify, he focuses. About the dispersion, he says: "If you have a harem with 40 women, you don't really get to know any one." He concentrates his investments on a few companies whose positive development he is certain - according to the motto: "Too much of a good thing is simply wonderful."
He makes his decision after a thorough analysis and with a lot of patience. And he's not a private investor, but the founder of Berkshire Hathaway and just - Warren Buffett.
What has Buffett been doing since the Corona crisis?
How did the "Oracle from Omaha" behave during the Corona crisis? In short - not at all at first. Buffett waited. That was true for spring and summer. The reluctance was reflected in share buybacks by his holding company Berkshire Hathaway. In the third quarter alone, from July to September 2020, the conglomerate spent around nine billion dollars on it. Calculated over the whole of 2020, it was over $ 16 billion. That seems like a lot. But you have to look at the ratios (as with the portfolio): In November 2020, Berkshire Hathaway was sitting on around $ 146 billion in cash.
In April 2020, Buffett sold all of its holdings in the four major US airlines: Delta, United, Southwest and American. He announced this at the beginning of May. Contrary to his otherwise long-term strategy (buy & hold), he sold the shares at a loss. Reason: “When we started buying, we got a lot for our money. It turned out that I was wrong. ”So Buffett doesn't believe in a (foreseeable) recovery.
In mid-August 2020, Berkshire Hathaway invested $ 564 million in Barrick, the world's largest gold mining company. The gold price had been chasing records since March. Before that, Buffett had always been skeptical of gold and its value: "It is better to have a hen that lays eggs instead of one that you just look at and for which you have to pay insurance premiums and storage fees."
"Part of Japan's Future" and the first new issue
On August 31, 2020, Buffett announced it would join five Japanese companies. With the acquisition he wants to become “part of Japan's future”. He took over each around five percent of the shares of the conglomerates: Itochu, Marubeni, Mitsubishi, Mitsui & Co. and Sumitomo, for a total of about 6 billion dollars.
On September 9, 2020, it was announced that Berkshire Hathaway is investing 550 million euros in the cloud provider Snowflake, a start-up. That was unusual for two reasons: On the one hand, Buffett had long emphasized that he was not familiar with new technologies and was therefore not investing in them. With regard to IPOs (Initial Public Offering, English for initial public offering) he coined the following sentence: “You don't really need to worry about what is actually going on with IPOs. People win the lottery every day. ”So IPOs are like gambling.
Here you can see Buffett's most recent purchases and sales as reported to the SEC:
Warren Buffett's Investments / As of September 2020, Source: warrenbuffettstockportfolio.com
Pharmaceutical stocks on Buffett's shopping list
If you look at the top positions that Buffett has bought new, you have to put them into perspective again. Bristol-Myers Squibb pharmaceutical company accounts for 0.78 percent of Berkshire's portfolio. T-Mobile US has a stake of 0.12 percent in the depot, and the pharmaceutical value Pfizer comes to 0.05 percent. AbbVie, also a pharmaceutical industry, makes up an impressive 0.81 percent. The insurer Globe Life has a stake of 0.22 percent, Merck & Co. 0.81 percent.
Only the banks are worth mentioning: Buffett has completely separated from Goldman Sachs. With one exception, he reduced the remaining bank stocks: Wells Fargo (-46 percent), PNC Financial (-64 percent) and JP Morgan Chase (-96 percent). In contrast, Buffett has expanded Bank of America's stake by nine percent.
Long story short, Warren Buffett is focused on three stocks - Apple, Bank of America, and Coca-Cola. That's two thirds of his portfolio. Half of it consists of Apple. The remaining positions with their back and forth impress when you see their monetary value - but that's only because the entire portfolio is so huge, at around $ 230 billion.
This is the strategy Buffett pursues in his investments
The composition contradicts everything we learn - we normal mortals. Why is that? In short: Buffett doesn't diversify, he focuses. Concentration creates wealth, diversification protects it. About the dispersion, he says: "If you have a harem with 40 women, you don't really get to know any one." He concentrates his investments on a few companies whose positive development he is certain - according to the motto: "Too much of a good thing is simply wonderful."
He makes his decision after a thorough analysis and with a lot of patience. And he's not a private investor, but the founder of Berkshire Hathaway and just - Warren Buffett. Children in front of the television are told: Don't do that at home! He says: "Broad diversification is only necessary if an investor does not know what he is doing."
When Buffett concentrates his holdings, he does so with a very long-term horizon: buy and hold, buy and let go. For Buffett, one of the most important virtues in the stock market is not being able to do anything, to wait and see. One of his many quotes is: "I made most of my money sitting on my ass."
It is against this background that you have to look at it if you want to talk about the tops and flops in Buffett's portfolio. The tops are its solid cross-country skiers, which are constantly developing and unfold their full power over time, via the compound interest effect: Apple, Bank of America, Coca-Cola, American Express. Buffett is a marathon runner, not a sprinter - an investor, not a trader. He has increased his fortune like a snowball turned into an avalanche. It is not for nothing that Alice Schroeder's Buffett biography is entitled "Life is like a snowball".
For the 50th birthday of his holding company Berkshire Hathaway in 2015, Wirtschaftswoche calculated that since 1965 the value of Berkshire shares has risen by 1.8 million percent. (For comparison: The broad S&P 500 index rose "only" 750,000 percent during this time.) The $ 10,000 invested in 1965 would have grown to over $ 800 million by now.
Buffett makes mistakes too
One may tinker with the investment in Kraft Heinz, with the sale of the airlines at a loss too. One may complain that Buffett overslept the rise of Facebook, Amazon, Netflix and Google. You can also see Buffett getting annoyed with himself: “I bought Dexter Shoe for $ 400 million in the mid-1990s. And that was a total loss. I also bought Berkshire Hathaway for around $ 400 million, and that investment is now worth around $ 400 billion. But I made a lot of wrong decisions. That's part of it."
Buffet's rule number one is therefore not: Get rich (quickly)! Instead he says: “Rule No.1: Never lose money.
Rule No. 2: Never forget rule No.1. "And about the important things, Buffett says:" The only way to get love is to be lovable. It's very irritating when you have a lot of money. You'd like to think that you could write a check, 'I'll buy a million dollars in love'. But that's not how it works. The more you give love, the more you get. "
How big is Buffett's current net worth
Time and a well-considered concentration of investments - what does Buffett's fortune look like today? In 2008 he became the richest person in the world.
At Forbes and Bloomberg it is currently in seventh and ninth place respectively with “only” good $ 90 billion.
He is a philanthropist who has pledged to donate 99 percent of his wealth to charity: "If you are one of the lucky one percent of humanity, you owe it to the rest of humanity to think about the other 99 percent."
In 2010, he and Bill Gates launched the Giving Pledge campaign, with billionaires pledging to donate at least half of their wealth to charity. Buffett told Spiegel in August 2011: “My friends and I have been pampered long enough by a billionaire-friendly Congress. It is time for our government to get serious about asking everyone to make common sacrifices. "
How did his wealth develop?
“The first million is always the hardest,” they say flippantly. The power of the snowball that turns into an avalanche - compound interest - can be impressively seen in Buffett's wealth development. He cracked the first million dollars in 1960, at the age of 30, with his limited partnership "Buffett Partnership". From now on we are experiencing exponential growth:
- $ 7 million by the age of 35
- $ 25 million at the age of 39
- $ 67 million by age 47
- $ 1.4 billion by age 56
- $ 2.3 billion by age 58
- $ 3.8 billion by age 59
- $ 17 billion by the age of 66
- $ 36 billion by age 72
- $ 58.5 billion by the age of 83
Warren Buffett's most famous quotes
Warren Buffett is known for packing his investment philosophy into catchy and (apparently) simple advice. Here are some of his most famous:
- “Only invest in a stock that you understand the business of. "
- "If a company is doing well, the stock will ultimately follow."
- "The stupidest reason to buy a stock is because it goes up."
- "Risk arises when you don't know what you are doing."
- “Opportunities rarely arise. When it rains gold, get the bucket, not the thimble. "
- “You don't have to be a rocket scientist. Investing is not a game in which the player with an IQ of 160 defeats the other player with an IQ of 130. "
- "The difference between successful people and the really successful people is that the really successful people say 'no' to almost everything."
- "Put all your eggs in one basket, but pay close attention to this basket!"
- "Only buy a stock if you would be completely satisfied with it if the market closed for the next ten years."
- "The most important investment you can make is yourself."
- “It doesn't matter how much talent or effort you put into something; some things take time. You cannot produce a baby in a month by getting nine women pregnant. "
- "You only have to do a few things right in your life, as long as you don't do too many things wrong."
- “The price is what you pay for. The value behind it is what you get. "
- "It is much better to buy a great company at a decent price than it is to buy a decent company at a great price."
- "Our favorite holding period is forever."
- "We are fearful when others are greedy and greedy when others are fearful."
- "Someone is sitting in the shade because someone planted a tree there a long time ago."
- “Life is like a snowball. It depends on finding wet snow and a very long hill. "
Warren Buffett Biography
A well-known biography of Buffett bears his quote as the title: "Life is like a snowball" (published in 2008 by Finanzbuchverlag). Alice Schroeder's book is over 1,000 pages long, but gives a unique insight into Buffett's life and world of thought.
Buffett's house, his car ... his humility
Warren Edward Buffett (that's his full name) still lives in his native Omaha, Nebraska, in the same house he bought in 1958 for $ 31,500. He's not a chauffeur, has been driving a 2014 Cadillac XTC ($ 44,600) since his daughter said the old one was embarrassing. The old car, a 2006 Cadillac DTS, had a market value of $ 12,000. Buffett had it auctioned for a charitable foundation: The auction proceeds: $ 122,500.
Buffett lived for a while with two women in a polyamorous love triangle: in 1952 he married Susan Thompson, who decided in 1977 not to live with him anymore. She moved to San Francisco and worked as a singer and political activist (civil rights, abortion, contraception). Until her death in 2004, however, she maintained the partnership with Buffett. She introduced her husband to Astrid Menks, who with her consent became his constant companion and moved in with him. Susan Thompson and Warren Buffett continued to appear as a couple. The two women got along well. Friends often received invitations that all three had signed. In 2006 Buffett married Astrid Menks.
Buffett achieved a fantastic return (140 percent) at the age of six: in the summer of 1936 he bought Coca-Cola six-packs for 25 cents and sold the individual bottles for ten cents each. (To this day he drinks three colas a day and two at night. For breakfast he eats ice cream with chocolate chips, but sometimes also salty biscuits.) Buffett bought his first shares at the age of eleven (Cities Service, now state-owned by Venezuela). He bought it for $ 38.25 and sold it for about $ 40, a return of 4.58 percent. The later "Oracle of Omaha" was able to steadily expand on this result.
Common questions about Warren Buffett
What is Warren Buffett's view of gold and silver?
As mentioned above, Buffett has also invested in Barrick Gold since the Corona crisis, but with a rather small amount by his standards. The investment does not concern the physical gold, but a company that mines gold - a business model. An important difference. The mining giant Barrick has recently continued to grow and connects gold mines all over the world. This is a solid stock that can stabilize a portfolio and has grown over the past few years.
Buffett's attitude towards gold as a commodity is skeptical, however. He says, “It will be dug out of the ground somewhere in Africa or some other place on earth, then we will melt it down and dig another hole to bury it again. Then we pay humans to stand around and guard it. It has no application. If anyone were to look at the whole thing from Mars, they would scratch their head. ”Gold has no intrinsic value, does not create wealth, it is only used for speculation. Buffett calls it “unproductive capital” that “will never produce anything, but is only bought in the hope that someday in the future someone else will pay for it.” Gold is “neither useful nor fruitful”.
Buffett has a different attitude towards silver: while gold is hardly used in industry, silver is different. It is useful. It is used, for example, in the medical and electronics sectors. Gold is basically just pretty. In 1998, however, Buffett held about 37 percent of the world's supply (!) Of silver. From mid-1997 he bought 130 million troy ounces of silver, that is over 4,000 tons. Its purchase price was $ 4.50 an ounce. So the total was $ 585 million. In 2005 Buffett sold the silver at $ 7.50 a troy ounce. He made a profit of $ 400 million.
Is Warren Buffett invested in Tesla?
In November 2020 speculation arose: Buffett had invested in Tesla, and secretly. Which would be extraordinary for the value investor in a very highly rated stock. The private relationship between the two CEOs is also not for the best - Buffett takes the view that Elon Musk overestimates himself. Conversely, the Tesla boss said he was "not the biggest fan" of Buffett and that his job was boring. In the third quarter of 2020, an unknown investor bought around 50 million Tesla shares for around $ 11 billion. He stayed just below the five percent threshold and did not need to submit a public report. A note from Berkshire Hathaway that they wanted to invest in a new company fitted in with this - but without disclosure in order to avoid price fluctuations.
From then on the rumors boiled. Speculation flourished. Was it previously thought possible that Buffett would invest in Apple? Even that strong? So why not Tesla? - To cut a long story short: Because he said it. When Buffett gave an interview in early May 2020, he made diplomatic and evasive statements about Elon Musk. But when it came to the “million dollar question”: “Would you invest in Tesla shares?” - the answer was short: “No.” To make it a little longer: An investment at Tesla would be some typical Buffett - Disagree with advice.
He says, “The key to investing successfully is not how much an industry will affect society or whether it will grow, but rather figuring out whether a particular company has a competitive advantage, and if so, how long it will last will last. ”If you are convinced of e-mobility as a growing industry alone, you can also buy an ETF. But where is Tesla's permanent moat? The stock has risen exorbitantly since March 2020, but Buffett thinks long-term, "The stupidest reason to buy a stock is because it goes up."
Nobody knows whether there might be something to the rumors after all. But there is some evidence that the speculation was just a lot of ado about nothing. “Noise,” say the Americans.
What does Buffett think of ETFs?
Many ETF investors belong to the passive school. They assume (gradually) efficient markets. Therefore, nobody is smarter than the market. You cannot systematically and permanently beat the market (Eugene Fama). Warren Buffett, on the other hand, belongs to the active faction. He sees “the market” as a bipolar creature: “That imaginary person out there - Mr. Market - is some kind of drunk psycho. Some days he's very enthusiastic, other days he's very depressed. ”Buffett consistently beat the market as one of the few exceptions. (The "systematic" partly questions science.)
Warren Buffett knows that his success is not the rule and therefore recommends private investors to invest in cheap ETFs. Since March 2020 he has even invested $ 13 million in two ETFs himself: one from Vanguard and one from SPDR, both on the S&P 500. A principle that always works: "Invest long-term, broadly, and then leave it alone That is why Buffett revealed in his letter to shareholders what he ordered in his will: his wife should invest 90 percent of the inherited money in an index fund on the S&P 500 and 10 percent in short-term government bonds.
Is Buffett Still Invested in Wells Fargo?
Wells Fargo was one of Buffett's favorite stocks in the past. The company had built a solid and particularly serious reputation for itself since the California gold rush of the 1850s. However, in 2016 it ruined that reputation. The reason was a fake accounts scandal where thousands of employees opened millions of fake accounts on behalf of customers.
After all, the third largest bank in the United States had to pay a fine of $ 100 million. Warren Buffett said: “Wells Fargo has made three serious mistakes, but one is particularly serious. Sooner or later a CEO has to act when there is a problem and he gets wind of it. They didn't react after knowing about the problem. "
As a result, Buffett decided against extensively selling Wells Fargo shares for tax reasons. Nonetheless, he gradually reduced his stake, from quarter to quarter. In 2016 he still owned more than 506 million shares; At the end of 2018 it was a good 442 million. A reduction of about 13 percent. As mentioned above, Buffett then significantly reduced his stake in the wake of the Corona crisis in 2020. At the end of 2019, Buffett still owned a good 345 million shares in Wells Fargo. In the 3rd quarter of 2020 it was then 136 million and in the 4th quarter (see above) 127 million.
Charlie Munger, Buffett's alter ego and partner at Berkshire Hathaway, explained in spring 2020: In the Corona crisis, the first thing to do is to keep the holding company liquid. New investments only come second. Wells Fargo only accounts for 1.3 percent of the holding's portfolio. It is possible that the rapid sale should serve to stabilize and secure.
Is Buffett a believer and what religion does he belong to?
Warren Buffett grew up in a Presbyterian household and was baptized Presbyterian. His first wedding took place at the Dundee Presbyterian Church in Omaha. However, he did not adopt the religious attitude of his parents. This is how Roger Lowenstein describes it in his biography: "Buffett: The Story of an American Capitalist", Buffett's actions were always based on numbers that he trusted more than anything else.
He did not join the religion of his family, writes Lowenstein: Even at a young age he was too mathematical and logical to take the leap to faith. He adopted the ethical foundations of his father, but not his belief in an invisible divinity. Philosopedia.org writes: When he was asked in 1997 whether he believed in the supernatural, whether he was a believer or not, Buffett replied on a postcard: "Agnostic".
Investment gurus are fascinating. A lot can be learned from Warren Buffett. However, his focused investment style is tailored precisely to him and his needs. Private investors diversify better.
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