Warren Buffett is considered by many to be the best investor of all time. When he set out on his own in the mid-1950s, investors entrusted him with just $100,000 (around $1m today) of their capital. Over the course of the past 70 years, he has grown this capital into a conglomerate with just under $1trn of assets.
Buffett started investing when he was 11 years old, buying six shares of Cities Service preferred stock (three shares for himself and three for his sister) at a cost of $38 per share. He made a small profit on this investment, and went on to build several other businesses.
He filed his first tax return at just 13 years of age. It was for the 1944 calendar year. He’d earned $592.50 in total, more than half of it from a paper round, the rest from investments. (He paid $7 in tax).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The young businessman attended the University of Nebraska before moving to Columbia University, where he met his mentor, professor Benjamin Graham.
Graham essentially wrote the book on value investing and he also managed his own investment firm, which the young Buffett joined when he left university. Unfortunately, Graham wound up the venture a few years after the young entrepreneur joined and he was soon back home in Omaha.
Soon afterwards, a group of family and friends asked Buffett to invest their savings in the stockmarket. The Buffett Partnerships, as they came to be known, earned a 31.6% annual return before fees from 1957 to 1968 compared to 9.1% for the Dow Jones Industrial Average. Buffett used a similar investment strategy to the one pioneered by Graham.
The Warren Buffett portfolio and the rise of Berkshire Hathaway
Buffett started buying shares in Berkshire Hathaway for his partners’ portfolios in the early 1960s. At the time, Berkshire was a struggling textile business. Its peers had a much lower cost base so they could undercut the firm on price. As losses mounted, the corporation’s market value fell below the value of the assets on its balance sheet.
The investor wanted Berkshire to start closing its manufacturing facilities and return the cash to its shareholders, which would have produced a fat, risk-free return for all of its shareholders. However, Berskhire’s management declined to follow his plan – so Buffett decided to take control of the business himself.
Buffett used Berkshire’s capital to buy up other firms, mainly companies in the insurance sector. In 1967, he bought Omaha-based insurer National Indemnity Company for $8.6m, giving him his first foothold in the industry. Not only was National Indemnity a well-run profitable insurer, but it also owned an investment portfolio, a valuable source of capital.
Today Berkshire Hathaway owns more than 60 subsidiaries, employing more than 300,000 people. It owns insurer Geico, battery maker Duracell, restaurant chain Dairy Queen, BNSF, one of the largest railroads in the US, and a utility giant, Berkshire Hathaway Energy – that’s all alongside a $300bn portfolio of equities.
Warren Buffett’s net wealth exceeds $100bn
At the same time, Buffett has built a huge fortune for himself. He is the fifth-richest person in the world (the exact position fluctuates but he’s generally in the top five) with a net worth of $112bn.
Virtually all of Buffett’s wealth is tied up in Berkshire Hathaway stock. Since he gained control of the business in 1965, the shares have returned 20.1% per annum compared to 10.5% for the S&P 500.
The top stocks in Warren Buffett’s portfolio
Buffett’s investing style can be defined by one of his best-known quotes, “Rule no. 1: Never lose money. Rule no. 2: Never forget rule one.”
Since the 1950s, the investor has always sought to find investment opportunities with low chance of a failure, but high return potential.
Buffett seeks to minimise the risk of failure by sticking to companies in sectors that he knows well. “Risk comes from not knowing what you are doing,” as he puts it.
He likes to own companies with an enduring competitive advantage, such as a well-known brand or substantial economies of scale, and will not pay over the odds for any business. As a value investor, he prefers to buy when other investors are selling.
In 2008 when the global financial sector was teetering on the edge of collapse, Buffett invested $5bn of Berkshire’s cash in Goldman Sachs, at extremely favourable terms which would have been impossible for an ordinary investor to access. The bet eventually yielded a profit of more than $3bn for the conglomerate. Around the same time he also ploughed cash into Dow Chemical, Bank of America and General Electric.
Despite this impressive bet, Buffett generally does not try to time the market or speculate on the price of securities. He believes that investors should approach buying a stock with the same mindset as if they were buying the entire business. He has encouraged others to “own your stocks as an investment – just like you’d own an apartment, house or a farm – look at them as a business.”
Here are the top 20 equity holdings in Berkshire Hathaway’s equity portfolio (which is managed by Buffett) as reported at the end of March according to the firm’s 13F regulatory filing:
| Company | Symbol | Holdings | Value | % of portfolio |
| Apple Inc | AAPL | 911,347,617 | $155,564,138,000.00 | 42.79% |
| Bank of America Corp | BAC | 1,032,852,006 | $41,636,348,000.00 | 11.45% |
| American Express Company | AXP | 151,610,700 | $28,351,201,000.00 | 7.80% |
| Chevron Corporation | CVX | 159,178,117 | $25,918,973,000.00 | 7.13% |
| Coca-Cola Co | KO | 400,000,000 | $24,799,999,000.00 | 6.82% |
| Kraft Heinz Co | KHC | 325,634,818 | $12,826,755,000.00 | 3.53% |
| Moody’s Corporation | MCO | 24,669,778 | $8,323,829,000.00 | 2.29% |
| Occidental Petroleum Corporation | OXY | 143,162,392 | $7,737,804,000.00 | 2.13% |
| US Bancorp | USB | 144,046,330 | $6,719,111,000.00 | 1.85% |
| Activision Blizzard, Inc. | ATVI | 74,187,400 | $5,152,292,000.00 | 1.42% |
| Davita Inc | DVA | 36,095,570 | $4,082,770,000.00 | 1.12% |
| HP Inc | HPQ | 121,092,418 | $3,792,480,000.00 | 1.04% |
| Bank of New York Mellon Corp | BK | 74,346,864 | $3,591,100,000.00 | 0.99% |
| Kroger Co | KR | 57,985,263 | $3,326,615,000.00 | 0.92% |
| Citigroup Inc | C | 55,244,797 | $2,945,319,000.00 | 0.81% |
| Verisign, Inc. | VRSN | 12,815,613 | $2,850,961,000.00 | 0.78% |
| General Motors Company | GM | 62,045,847 | $2,713,886,000.00 | 0.75% |
| Paramount Global Class B | PARA | 68,947,760 | $2,606,915,000.00 | 0.72% |
| Itochu Corporation | ITOCF | 81,304,200 | $2,330,991,414.00 | 0.64% |
| Charter Communications Inc | CHTR | 3,828,941 | $2,088,764,000.00 | 0.57% |
| Liberty Sirius XM Group Series C | LSXMK | 43,208,291 | $1,975,915,000.00 | 0.54% |
| Visa Inc | V | 8,297,460 | $1,840,128,000.00 | 0.51% |
| Amazon.com, Inc. | AMZN | 533,300 | $1,738,531,000.00 | 0.48% |
| Aon PLC | AON | 4,396,000 | $1,431,470,000.00 | 0.39% |
| Mastercard Inc | MA | 3,986,648 | $1,424,748,000.00 | 0.39% |
| Snowflake Inc | SNOW | 6,125,376 | $1,403,507,000.00 | 0.39% |
| Celanese Corporation | CE | 7,880,998 | $1,125,958,000.00 | 0.31% |
| Liberty Sirius XM Group Series A | LSXMA | 20,207,680 | $923,692,000.00 | 0.25% |
| McKesson Corporation | MCK | 2,921,975 | $894,504,000.00 | 0.25% |
| Nu Holdings Ltd | NU | 107,118,784 | $826,957,000.00 | 0.23% |
| RH | RH | 2,170,000 | $707,615,000.00 | 0.19% |
| T-Mobile Us Inc | TMUS | 5,242,000 | $672,811,000.00 | 0.19% |
| Globe Life Inc | GL | 6,353,727 | $639,185,000.00 | 0.18% |
| Markel Corporation | MKL | 424,343 | $620,034,000.00 | 0.17% |
| Liberty Media Formula One Series C | FWONK | 7,722,451 | $539,336,000.00 | 0.15% |
| Store Capital Corp | STOR | 14,754,811 | $431,283,000.00 | 0.12% |
| Ally Financial Inc | ALLY | 8,969,420 | $389,990,000.00 | 0.11% |
| Floor & Decor Holdings Inc | FND | 4,780,000 | $387,180,000.00 | 0.11% |
| StoneCo Ltd | STNE | 10,695,448 | $125,137,000.00 | 0.03% |
| Verizon Communications Inc. | VZ | 1,380,111 | $70,303,000.00 | 0.02% |
| Marsh & McLennan Companies, Inc. | MMC | 404,911 | $69,005,000.00 | 0.02% |
| Royalty Pharma plc | RPRX | 1,496,372 | $58,299,000.00 | 0.02% |
| Johnson & Johnson | JNJ | 327,100 | $57,972,000.00 | 0.02% |
| Procter & Gamble Co | PG | 315,400 | $48,193,000.00 | 0.01% |
| Diageo plc | DEO | 227,750 | $41,650,920.00 | 0.01% |
| Mondelez International Inc | MDLZ | 578,000 | $36,287,000.00 | 0.01% |
| Liberty Latin America Ltd Class A | LILA | 2,630,792 | $25,518,000.00 | 0.01% |
| Vanguard 500 Index Fund ETF | VOO | 43,000 | $17,852,000.00 | 0.00% |
| SPDR S&P 500 ETF Trust | SPY | 39,400 | $17,795,000.00 | 0.00% |
| United Parcel Service, Inc. | UPS | 59,400 | $12,739,000.00 | 0.00% |
| Liberty Latin America Ltd Class C | LILAK | 1,284,020 | $12,314,000.00 | 0.00% |
-
House prices are falling in London but how does it compare to the rest of the UK?Advice The capital remains the most expensive part of the UK to buy a property, but it isn’t being as badly hit by the housing market slump. Where are London house prices heading?
-
Will a Santa Rally provide festive cheer for investors this year?
News Equities often get a seasonal boost during December - will there be a Santa Rally in 2023?
-
The US is in one of the greatest bubbles in financial history
Cover Story Jeremy Grantham, who has a history of getting big calls right, fears slumps in several wildly overpriced markets (including UK property). He tells Merryn Somerset Webb what investors should do now
-
Why investment forecasting is futile
Opinion Every year events prove that forecasting is futile and 2020 was no exception, says Bill Miller, chairman and chief investment officer of Miller Value Partners.
-
Bill Ackman: beware of short-term market volatility
Opinion Bill Ackman, founder of the Pershing Square hedge fund, is upbeat on prospects for markets in 2021, but is worried about short-term volatility as coronavirus takes its toll.
-
Mark Mobius: Lockdowns are a losing game
Opinion An easing up of lockdown efforts is likely to mean ”economic recovery at the end of this year and the beginning of next year”, says Mark Mobius, co-founder of Mobius Capital Partners.
-
Will Danoff: buy firms that are doing well right now
Opinion Forget future earnings, says Will Danoff, portfolio manager at Fidelity. What matters is now.
-
Anatole Kaletsky: I was wrong to be bearish on stocks
Opinion There are “three clear reasons” for equity markets to keep climbing, says Anatole Kaletsky, chief economist at Gavekal.
-
James Montier: valuations are way too high
Opinion The market is completely discounting the risk to the economy and operating as if there is nothing to worry about, pricing in a V-shaped recovery, says James Montier, investment strategist at GMO.
-
Abby Joseph: US markets have no margin for error
Opinion Much of the markets' recent strength is down to the US Federal Reserve using monetary policy to backstop the equity market, says Abby Joseph Cohen, senior investment strategist at Goldman Sachs.
