When you think about investing, the first thing that comes into your mind is this complicated
world of stock market where no one seems to clearly understand whats going on because
every time when things seem to go in the right direction, we end up facing a financial crisis.
But Unlike everyone else, one man seems to know a secret formula when it comes to investing.
Over his life he continuously made successful investments and he is considered by many as
the greatest investor of all time.
But the question that interests me in the this video is, how warren buffet invests?
Why does he prefers one company over the other?
Which companies did he has invest in and why?
These are the questions we are going to answer!
If you take look at all the companies that warren buffet has invested, you will find
that they are connected one way or another even though they are in completely different
industries.
Since warren buffet is a long term investor, he looks for businesses that are simple and
direct so the he can actually predict the future of the bossiness.
This is the product, these are the customers and this is why they are going to buy it and
10 years from now, they will keep buying it, thats the kind of business that warren buffet
loves.
The second trait is will the customer buy the product again and why?
And this is extremely important because you dont want to sell your product once, you want
your client to come back every day or every week and buy the product again.
And the 3rd component is the brand.
Because people will buy from the company that feel connected to and familiar.
Warren Buffet is one of the major investors in Coca Cola.
In fact, he started investing in Coca Cola back in 1988, and his investments since then
has grown by over 16 times.
The business model of Coca Cola is absolutely simple.
Their potential customers are almost anyone who is thirsty.
And every time they would get thirty, they would want to drink something, which means
they will keep coming back.
The Coca Cola brand name is so powerful that out of 20 or 30 soft drink options that you
find in the store, most people would probably pick Coca Cola without even thinking.
1.8 billion cans are sold every single day.
If the company will earn a single penny out of every can, thats 18 million dollars a day,
or 6 570M a year.
But with such a powerful brand, they can charge more than a penny for every can.`
Lets take a look at another example.
In 1989, warren invested 600 Million dollars in Gillette.
The company that makes razors.
If you give it a closer look.
Gillette holds the exact same position in its industry as Coca Cola holds in beverages.
Regardless of what happens, people will still have to shave.
Even a little kid will understand their business model.
This is what the product does(razor) and this is why people will keep buying it.
And if you ask people to name a razor brand, 90% of people wont be able to mention any
other brand beside Gillette.
And 10 or 15 years from, people would still have to shave.
The exact same story repeats with See’s Candy.
In fact, it has been one of his best investments ever.
Even though that the company wasn’t super profitable, it had an extremely strong brand.
Buffet realised that people dont usually buy candy’s for themselves but as gifts to others.
So people would keep coming back for Chrismas, valentine’s day, birthdays whatever.So,
he acquired the company in 1972 for 25 Million dollars when it was making roughly 4 million
dollars in profit.
Since then, Company’s profit increased 20 times over the next 35 years.
In 2007, it made a profit of 82 Million dollars.
And if you take a look at other businesses that Buffet has invested, you will find that
there are pretty similar to these ones.
I am sure that you are feeling inspired and energise to invest like Warrant buffet.
Who knows maybe you are going to be better than him, Never underestimated yourself.
But you have to start with learning the basics of stock market first because its pretty easy
to go out there and lose money.
That’s why I have found for you a perfect course on stock market, which you can watch
for free if you use the link in the description.