Weekend Read: Warren Buffett’s Top 10 Most Genius Investments Ever
Investing.com | May 04, 2019 12:32
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.
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 his best investments ever.
Year: 2008
Investment: $5 billion
Return: $5.64 billion + 13 million free shares of stock
Goldman 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 $5 billion worth of Goldman Sachs’ stock when the market collapsed in 2008.
In 2008 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.
Year: 2011
Investment: $5 billion
Return: $14.2 billion
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.
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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 Buffett made that brought the banks out of the ashes. By contrast, he firmly rejected the Lehman Brothers offer.
Year: 1988
Investment: $4 per share
Return: $70 per share
Warren 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 U.S. 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.
Year: 2009
Investment: $44 billion
Return: $93 billion
Burlington 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.
Year: 1972
Investment: $25 million
Return: $1.32 billion
See’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 go 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 (NYSE:KO) door to door.
Year: 1988
Investment: $1.3 billion
Return: $19 billion
Coca-Cola is perhaps 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.
Year: 1970
Investment: $12 per share
Return: $280 per share
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.
Year: 2002
Investment: $488 million
Return: $3.6 billion
Despite 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.
Year: 2008
Investment: $230 million
Return: $1.8 billion
Another 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 10 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.
Year: 1995
Investment: $290 million
Return: $27 billion
Buffett’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.
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