If you ask anyone who is the richest investor of all time, everyone will point fingers at
Warren Buffett, and that is not by accident.
He started investing when he was just 11 years old and built his net worth to over 87 billion
dollars at the time of this script.
To an average person, the stock market seems so complicated where no one seems to clearly
understand what's going on.
Whenever things seem to go in the right direction, we end up facing a financial disaster.
But unlike everyone else, This guy seems to know a secret formula when it comes to investing.
Over his life, he continuously made successful investments over and over, and he is considered
by many as the greatest investor of all time.
He was so good that just by the age of 16, he already made over 53K thousand dollars.
Can you imagine making Making 53 grand from the stock market before you hit 16 and still
be rejected by Harvard?
I can, because that's what happened.
Do you want to learn how to invest like Warren Buffett?
Do you want to find out his secret formula?
Then stick around because we are going to take a deep look into Warren Buffet's investment
portfolio.
- Buffett's 3 Golden Rules
Warren Buffett is a long-term investor.
He doesn't care about how the company is going to perform today, tomorrow, or even next year.
His primary concern is where the company will be ten years from now or 15 years from now.
But How do you know how a certain company is going to perform in 10 years?
Its almost impossible to predict.
That's why Buffett almost always invests in companies with simple business models.
This is the product, these are the customers, and this is why they are going to buy this
product.
You don't have to be a genius to understand their business models.
Its so simple that even a little kid would understand that model.
That's what Buffett loves because the simpler the business model is, the easier it gets
to predict the future of that company, and if their products are going to stay relevant
ten years from now, for example.
The second trait that warren buffet looks for is - will the customer buy the product
again?
If you have the kind of a product that would sell once and the client wouldn't need it
anymore, then your market is limited.
A great product is when your clients would keep coming back for it every now and then,
whether it's every day or every week or even every year.
Like bread, for example, if you are selling bread, you would expect the exact same customers
to come back tomorrow or next week over and over, and ten years from now, people would
still buy bread.
You might sell it in a different way or a different form.
You might improve its quality, make it tastier, package it fancier, but it's still the exact
same product.
In fact, this factor is so important that it led to the rise of subscription business
models, where the business would charge you a little fee every month like Netflix, for
example, or every year like amazon prime.
Because it's a more sustainable strategy.
Once you acquire the customer, you keep generating cashflow theoretical forever.
Finally, the third component is the brand.
People have the tendency to buy from the companies that they feel connected to and familiar with.
Whos sneakers would you buy, the first ones are from a brand that you have never heard
of, and the second ones are good old Nikes.
Even if they are cheaper and look fancier, you probably would hesitate to buy them because
you simply haven't heard of that brand before.
On the other side, you easily recognize Nike.
It's a well-established brand and is known for making great sneakers.
You might already be wearing a pair of Nike shoes, so which one would you chose.
And that's why Buffett pays such critical attention to how powerful is the brand name
before throwing his billions into that company.
He understands how much of an influence it's going to have on the consumer's decision.
In fact, if the brand is strong enough, consumers would buy almost anything that company produces.
And now, since we know Buffett's secret formula, let's take a look at his portfolio and find
out if he practices what he preaches.
Warren Buffett has always stayed away from tech companies, but in 2016, he made an exception
and invested billions of dollars in Apple.
In fact, his company, Berkshire Hathaway, holds almost a billion Apple stocks worth
an estimated amount of 118.6 billion dollars.
It is his biggest position, at least for now.
Apple, of course, does not sell bread, but if you pay attention, it has all the three
traits that we have just talked about.
Their Business model is simple.
At least for now, they want to keep making devices that people just need on a day to
day basis.
Such as an iPhone or MacBook, they rarely come up with super innovative products, but
they just know how to make a smartphone for the average consumer.
Do apple customers come back again over and over?
Yes, they do, iPhone is, of course, not a necessity, but people keep coming back for
it every September.
In fact, in the last ten years, Apple has drastically been shifting to a subscription-based
model.
It's not enough to have an iPhone.
You need a subscription to apple music, apple tv, iCloud, and a million other things.
And lastly, does apple has a strong brand name?
Of course!
It is probably the most powerful brand in the world!
His second-largest investment is in Bank of America.
He holds 29.8 billion dollars worth of shares of Bank of America.
We are not going to get into the detail, but you get the picture.
Their business model is straightforward, they have a strong brand, and their clients keep
coming back for financial services.
And it doesn't seem like people will no longer need financial services in the future.
That's why he has also invested in other banks, starting from Wells Fargo to Goldman sacks.
He was also a huge investor in many airlines, but 2020 forced him to sell all of his airline
shares because the future of this industry seemed too unpredictable.
He also holds 21 billion dollars worth of Coca Cola stocks.
In fact, he started investing in Coca-Cola back in 1988, and his investments since then
have grown by over 16 times.
What do they sell, a drink!
Who are their potential customers?
Pretty much anyone who is thirsty!
The entire world!
Is it a one-time product, or their clients keep coming back for it?
Of course, they will come back.
Some people drink like 4 or 5 cans a day.
It is addictive.
It is not easy to quit even if its unhealthy!
However, it has a lot of competitors, I mean, the shops are filled with an endless number
of soft drinks, but the coca-cola brand name is so powerful that out of 20 or 30 options,
you easily recognize it.
Most people would probably pick Coca-Cola without even thinking.
And if it's out of stock, you probably would go to another store instead of choosing one
of the 30 other options they have.
He is also a major investor in American Express, Kraft Heinz, and US Bancorp.
I can't name them all because they are too many of them, but I will leave a link where
you can find out the rest of the companies.
Besides his investments in publicly traded companies, he also owns entire private companies
or a significant majority like in Gillette, for example.
He purchased 600 Million dollars worth of Gillette Shares.
Gillette holds the exact same position in its industry as Coca-Cola does in beverages.
They are like twin brothers.
Regardless of what happens, people will still shave.
And their products are just filling that basic human need.
You don't need to have an IQ of 500 to understand why people are buying razors or while they
will keep coming back for that product even ten years from now.
But of course, Gillette isn't the only company in its industry.
It has a ton of competitors.
However, if you ask people to name a razor brand other than Gillette, 99% of people won't
be able to do that.
Do you see how it perfectly matches with all the requirements that Buffet has?
It's a simple product that people keep buying over and over.
He is also a huge investor in GEICO, Duracell, Netjets, Sees Candy, McLane, and many, many
others.
His portfolio is so diversified that if one industry suffers, it will not have any meaningful
impact on his net worth.
Berkshire Hathaway suffered tremendously this year, but it has risen back to its pre-pandemic
levels already, and I won't be surprised if this company will join the trillion-dollar
club in the next few years.
And now it's your turn?
Are you an investor in Berkshire Hathaway?
Do you think his strategies are still relevant to this day?
Let me know in the comments below.
Thanks for watching and until next time.