There is a single word that explains why you won’t find the next Warren Buffet – GREED. JC here with MVM current and cool Warren buffet became an investor at age 11 buying his first stock and at age 93 is the world’s most famous stock investor aka the Oracle of Omaha has become even more famous for his annual shareholders meeting. Where anyone who owns, a share can come to Omaha and listen to investing, business, and life philosophies.
His company Berkshire Hathaway, the World’s greatest “compound interest” machine is the 7th largest US company. You can buy class B shares at $400 apiece and class A closer to $600,000 and on pace to become the first non tech company in the USA worth $1 trillion.
Buffets long time business partner if 50 years, Charlie Munger passed away last year at the age of 99, and known for making quotes like “The big money is not in the buying and selling but in the waiting” and “All I want to know is where I am going to die, so I’ll never go there.”
These men made their fortunes believing in ‘Value investing’ or buying good companies at a fair price believing if you could buy a “Great business at a fair price it is superior to a fair business at a great price”. No longer trying to eke out profit by buying cheaply but believing in the value that the company could produce over time. Holding these good companies for the long run instead of selling for short gains.
Last 40 years (forty) Berkshire has outperformed the S&P. Example 1965 bought $1,000 in S&P 500 would be $300,000 today where Berkshire Hathaway would be $42.5 Million!
Another reason people buy and believe in Buffett is because Berkshire does not take fees like a hedge fund. If Berkshire charged a typical 2% and 20% that hedge funds do, instead of $42.5 million today that 1,000 would be 5 million – great return but you can see why people love Buffett is because he isn’t greedy, allowing the gains to stay with his army of investors.
Had he charged like a hedge fund he would be worth close to $500 Billion but his army of followers wouldn’t have as much wealth. This is counter to how investments work today where a management fee is charged based on percentage of assets under management and the manager is incentivized to grow the assets to make more money.
Focusing on bringing more external dollars in rather than focusing on internal dollars generating more. This cycle creates “hot fund hype” where people see one year performance, chase the hot hand by throwing money into a fund, the manage then buys the same philosophy at its peak, only to see a downturn in the return and those same hot hand chasers sell out, forcing the manager to sell at a bad time. Those funds trade on behavior and not opportunity. Berkshire wanted to change this as Value investor knows “your chief problem is often yourself” and your behavior.
Do not worry if Warren has been making money, Buffett has taken a small $100,000 salary, think of that the next time you see CEO or asset manager salaries in the millions! Warren also continues to hold over 200,000 Class A shares worth $130 Billion.
Until you find a manager that will close funds even as the performance rises or will only charge a fee if they outperform AND is able to maintain a successful stock picking strategy for half a century, you will not be to imitate the Oracle of Omaha, Mr Buffett. Show people you speak money; find a strategy you believe in and a mentor you trust for your investments.
