Weekend Read: Warren Buffett’s Top 20 Most Genius Investments Ever
Investing.com | May 11, 2019 10:00
Warren Buffett is one of the most well-known names in American business. He is the CEO and chairman of the investment firm Berkshire Hathaway (NYSE:BRKa), and has a stunning net worth of $83 billion. Originally from Nebraska, he is a philanthropist in addition to his long-standing business achievements.
Buffett has three children, and he is often referred to as “the Wizard,” the “Sage,” and “the Oracle (NYSE:ORCL)” in the media because of his uncanny ability to make wise investment decisions. Very few of his investment choices ever go poorly.
Warren Buffett has been an outspoken activist for increasing taxes on the wealthy, something that has not made him popular among millionaire and billionaire circles in America. On this list, you will find some of Warren Buffett’s best investments ever.
h2 Goldman Sachs (NYSE:GS)/h2Goldman Sachs has arguably been one of Warren Buffett’s best investments. His rule on banks is generally one of “don’t invest,” but he has made some exceptions, and Goldman Sachs is one of them. He scooped up five billion dollars worth of Goldman Sachs’ stock when the market collapsed in 2008.
2008 Warren Buffett was a shark, calmly purchasing stock in companies that were about to lose everything. He picked and chose what he wanted to save, and GS was one of them. Throughout the years, his firm has seen a good return on GS.
His original investment was only part of what he had in mind. He signed contracts with Goldman Sachs to purchase another $5 billion for $115 per share. He called their tab in 2013 for billions.
h2 Bank of America (NYSE:BAC)/h2
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Bank of America is another exception to the Buffett bank rule (and it’s one of only five or six exceptions). As with Goldman Sachs, this took place on a scheduled routine, with some shares bought early while others were contracted into the future.
The initial sale was of 50K cumulative preferred shares. The liquidation value of the shares was, at the time, $100,000 per share, though Buffett and his firm had no plans to liquidate right away. His firm also signed contracts to purchase 700 million shares. The prices of those were fixed at a little over $7 per share.
Goldman Sachs and Bank of America were two decisions that Buffett made that brought the banks out of the ashes. By contrast, he firmly rejected the Lehman Brothers offer.
h2 Freddie Mac/h2Warren Buffett purchased shares of Freddie Mac before selling them at a whopping profit. Buffett purchased this stock back in 1988, but sold it a little over a decade later. Freddie Mac, for those who don’t know, is a mortgage agency backed by the US government.
The company tanked less than a decade after the stock market crashed. When Buffett purchased shares of Freddie Mac, he did so for a mere $4 per share. At the sell-off point, he sold them for $70 per share. The reason he sold was that he felt that Freddie Mac was taking needless risks in order to make a profit.
He was right. Now, Freddie Mac trades at $3 per share. Whether Buffett exactly foresaw the mortgage crisis itself? Now, that’s up for debate.
h2 Burlington Northern Santa Fe/h2Burlington Northern Santa Fe is a railroad company. When Buffett purchased the company, he was pretty adamant about what he was doing, stating that he was making an “all-in wager” that was metaphorically betting on the “future” of America. He paid $44 billion at the time.
In 2009, people thought Buffett was crazy. But of course, he wasn’t purchasing the company for its current value. He was purchasing the business idea of BNSF. He knew it could be a successful model because of environmental benefits, which also happened to be cheaper.
Buffett calculated that BNSF was three times less expensive when it came to fuel than was trucking. He also saw the societal benefit to lessening American dependence on foreign oil, stating that America “gains” when companies such as BNSF succeed. He more than doubled his investment.
h2 See’s Candy/h2See’s Candy is one of Buffett’s more interesting investments because not a lot of people expected it to succeed. Buffett bought See’s way back in 1972. See’s needed a buyer after its patriarch, Laurance See, passed away. The company thought they were going to under but managed to stay afloat.
Buffett walked into See’s in 1972. His favorite See’s candies became their chocolate walnut fudge and peanut brittle. His investment partner, Charlie Munger, was also with him. They both fell in love with the company, calling it a “dream business.”
Buffett bought the company, turning a major profit on it. He felt, as did Munger, that the brand was strong due to its very loyal base of customers. Buffett also had nostalgia, as one of his original ventures was selling candy and Coca Cola door to door.
h2 Coca-Cola (NYSE:KO)/h2Coca-Cola is perhaps Warren Buffett’s best “I told you so” stock. He first invested in the late 1980s, and he told everyone else to invest too, though few were keen enough to listen. He felt that Coca-Cola had a good business model, and it was going to be “dominant” in the beverage industry.
He bought 6.2% of the company, which, at the time, meant that Coca-Cola was Buffett’s predominant business holding. When he purchased the stock, it sold at $2.45 a share. Now, in 2019, it is selling for nearly $50 per share (but, of course, with the stock market, that’s subject to change).
Buffett has noted that “changing consumer habits” are causing Coca-Cola and other food and beverage holdings to fluctuate, though he claims that he will “never” sell off his Coca-Cola shares.
h2 Berkshire Hathaway/h2Warren Buffett’s flagship investment firm, Berkshire Hathaway, is itself one of Buffett’s most legendary investments. It was unique from his other ventures because it became his investment vehicle for acquiring and purchasing companies. Buffett first purchased the stock for $12 per share.
Berkshire, at that time, was a textile company, not an investment firm. Buffett shut down the company and totally retooled it. He acquired insurance companies through Berkshire Hathaway, as well as a range of other businesses, such as Fruit of the Loom, Heinz, Dairy Queen, and more.
Berkshire also provides insurance, and that gives it a large source of cash. Buffett is a “hands off” investor, only getting involved when companies are about to crumble, such as paint producer Benjamin Moore, which Buffett had to swoop in on.
h2 Petrochina/h2Despite Buffett’s warning that America should lessen its dependency on oil, his firm has purchased epic amounts of stock in oil companies (perhaps it’s best to play both sides). PetroChina is an oil company located in China. It was struggling when he purchased it.
PetroChina’s oil fields were dilapidated and sucked dry at the time, and the company was hemorrhaging money and building debt. It had about 40,000 employees at the time. Buffet looked past that and believed that the company was worth $100 billion—nearly three times what it was when he bought 1.5% of it.
He undershot his estimate. PetroChina found new oil sources and oil prices rose. Now, that company is worth $275 billion, and Berkshire Hathaway made billions from Buffett’s vision for the company’s future, doubted at the time though it was.
h2 BYD/h2 h2Another Chinese investment of Buffett’s (one of many, in fact) was BYD. BYD is a battery company located in mainland China. Charlie Munger gets credit for this purchase, as he was the one to get Buffett to take a chance on it. Munger met the CEO of BYD, Wang Chuan-Fu, and Munger loved him.
Munger said that Chuan-Fu was a “descendant” of “Jack Welch and Thomas Edison” because he was a problem-solver like Edison and a take-charge type of CEO like Jack Welch. Munger was amazed at Chuan-Fu and he sold Buffett on the company.
Munger was right, and the investment is worth ten times now what it was back then. The company is holding steady in BYD, and they are excited at the prospect of electric cars and the profit from them.
h2 Wells Fargo (NYSE:WFC)/h2Buffett’s 1995 Wells Fargo investment is yet another example of Buffett breaking his own rules and investing in a bank. He announced his decision to invest $290 million in Wells Fargo in a letter to Berkshire Hathaway shareholders. That intent letter was sent in 1990, and the purchase itself was made in 1995.
Since then, Wells Fargo has become one of America’s most profitable banks. Its market capitalization at the time of the 1990 letter was almost $3 billion. Now, it is worth around $275 billion. Buffett and the Wells Fargo CEO are also friends, with the latter even trying to convince Buffett to cut down on his salt intake.
Buffett purchased Wells Fargo because at the time, it was a huge bargain. He couldn’t resist the struggling bank, and thankfully for his clients, he did not.
h2 The Intelligent Investor/h2This one is more metaphorical than a literal investment, but the link is definitely there. Time and time again, Buffett has praised the book “The Intelligent Investor,” which was written by Benjamin Graham. Buffett has personally labeled this book his “best investment ever.”
He first purchased and read “The Intelligent Investor” in 1949, the year it was released. Buffett was so inspired that he enrolled in the business school at Columbia University solely to take classes under Benjamin Graham. Buffett has recommended it to his friend and fellow investor Bill Gates, and he brings it up to his shareholders in letters.
To this day, Buffett often cites this 65-year-old book as a pivotal guidepost for his investment decisions. The cheap purchase of the book was a low price that yield an exceedingly high value of knowledge.
h2 Apple (NASDAQ:AAPL)/h2Apple is Warren Buffett’s and Berkshire Hathaway’s largest stock holding that they have. They haven’t been investors for long, only getting into the company a couple years ago. Buffett’s decisions with Apple have been steady. He has never sold his stocks, often deciding to acquire more instead.
There was a recent bout of confusion when one of Buffett’s portfolio managers sold three million shares of Apple. But, those were the manager’s own personal holdings—not Buffett’s. Buffett did not sell off Apple.
Buffett’s stock managers, Combs and Weschler, make independent decisions with his portfolio. Buffett picks the stocks himself, but the two men each make choices about the portfolio itself. That was why the three-million sale caught people off-guard. It was cleared up in a press conference.
h2 United Continental/h2Warren Buffett’s investments in airlines are his bread and butter. He has invested in countless airlines since he started working with Berkshire Hathaway, and those investments have usually paid off pretty well. United Airlines’ parent company is United Continental, which Buffett owns a huge stake in.
What Warren Buffett sees in the airline industry has long been confusing to market-watchers, particularly as scandals continue to rock all the airlines, with Buffett occasionally being pushed to comment tersely on the mistakes. Buffett himself said that once that airlines were “a death trap.”
Buffett has since changed his tune. It’s rumored that he sees that United is improving its company and valuation, and he is impressed at the intrinsic value. The investment is currently paying off, proving Buffett right once again.
h2 USG Corporation/h2Warren Buffett is not a big seller, so his behavior with USG can be characterized as something of an outlier. USG makes drywall. Berkshire Hathaway owned 31% of USG at one point, but there was friction between shareholders and leadership. The firm voted against four nominees for director of USG.
The votes came after the company refused a buyout from German company Knauf. The company was struggling, so it’s decision to refuse the Knauf offer was surprising. However, USG had a change of heart.
It agreed to a $7 billion Knauf buyout. Buffett stated that he was “disappointed” by the way USG turned out, and that part of that failure was due to the gypsum business taking a downturn. This was one of Buffett’s rare investment disappointments.
h2 Charter Communications (NASDAQ:CHTR)/h2Charter Communications is the fourth-largest cable provider in America. Warren Buffett set his eye on the company back in 2014, with something (though he’s never publicly said what) catching his attention. When Buffett purchased shares in the company it had hit a low point in the spring of 2014.
The company does have a lot of positive aspects to it that indicate stability. The stock has been consistently performing well. Buffett is not a high-risk purchaser, and a consistently-performing stock doesn’t make him change his mind, even if it’s not soaring to new heights.
The company also has a good earnings per share and revenue growth rate that make it attractive to stability investors like Buffett. While there are some downsides (weak cash flow being one), the positives are bright.
h2 Southwest Airlines (NYSE:LUV)/h2Southwest and Delta are two of Buffett’s biggest airline investments as of late, with Southwest in particular paying off well for the investor. Southwest has managed to stay relatively clear of PR disasters and controversy, and its stock has done well as a result.
Buffett invested in Southwest in 2018 (along with Delta). His stock is already showing modest returns. Currently, Berkshire Hathaway is Southwest Airlines’ second-largest stockholder. There have been rumors spreading about Buffett purchasing the airline.
These rumors came after Buffett told shareholders he wanted to make an “elephant-sized” purchase. Even the rumor of this action bumped Southwest stock up 4%, showing how impactful Buffett is on the economy, whether he buys it or not.
h2 Delta Airlines (NYSE:DAL)/h2Delta is another profitable airline in Buffett’s portfolio. Buffett has actually upped his Delta shares stock in recent months. The company purchased more than 5.3 million extra shares of Delta, which was selling at a little over $49 per share. This worked out to around $265.2 million. The purchases took place last month over a span of two days.
But the Delta investment goes back to last year. It’s another recent acquisition that signifies Buffett’s warming towards airlines. Remember, Buffett is the chief stock-picker for the company. Delta Airlines also bought back a lot of its stock. That bumped Buffett’s holding in the company up to more than ten percent.
This holding was more than he was comfortable with, he said, but that percentile sank once the buyback dust cleared.
h2 Moody’s Corporation/h2Warren Buffett likes Moody’s Corporation a lot, and he has often been an enthusiastic purchaser. Moody’s Corporation is a credit rating company that assigns credit scores. While that doesn’t exactly seem like the most profitable business, Buffett likes the company anyway.
Right now, 2.2% of Berkshire Hathaway’s investment portfolio is dedicated to Moody’s Corporation. The company is marked at “neutral volatility” by brokerage company Cantor Fitzgerald, and Moody’s is performing at 1.6% annually, which isn’t bad. The investment has paid off big time.
Moody’s has a long history dating back over a hundred years. The company was founded more than a century ago in 1909. It used to be two separate publishing companies, but it merged. Its founder was John Moody. Moody is considered to be the inventor of the modern-era credit rating for bonds.
h2 Bank of New York Mellon (NYSE:BK)/h2Bank of New York Mellon has continued to catch Buffett’s eye over the years, and he has repeatedly loaded up on this bank’s stock, increasing investments each quarter. It recently acquired more than 2.6 million new shares in 2018, adding to its total of more than 64.8 million shares.
This is considered one of Buffett’s classic “bargain-hunter” stocks. BNY was not doing so hot when Buffett first invested, and his investment signifies that he thinks it is going to do well. Certainly, BNY has been around for a while. It merged in 2007 with Mellon Corp., but the Bank of New York was founded in 1784.
Mellon Corp. also has a long history, having first been founded in 1869. This longevity likely appealed to Buffett.
h2 American Express (NYSE:AXP)/h2The American Express investment is considered one of Warren Buffett’s finest. Most regard it as an early, pivotal moment in Buffett’s investing career. Buffett definitely took a risk on the credit card company. He first invested in 1963, right after AmEx got burned on a bad deal with Allied Crude Vegetable Oil.
Allied was caught lying to AmEx, committing corporate fraud by faking its inventory (the firm was filling oil drums with seawater). While the company was claiming it had 1.8 billion pounds of oil in supply, In reality it had just 110 million pounds.
AmEx shares dropped forty percent, and Buffett swooped in. He invested 40% of his assets into the company. It doubled in a span of three years, giving millions of returns and making the Buffett name big in investing.
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