Thinking of Investing Like Warren Buffett? Don’t Even Try

Warren Buffett is the well-known head of Berkshire Hathaway. He has made himself a billionaire several times, and made his investors tremendous returns.

Berkshire Hathaway doesn’t really build anything. Rather, it holds companies that make things, or supply services. So, when someone buys a stake of BRK they are actually buying a portion of the companies it owns, and a piece of the over $116B it invests in equities of other public companies from the cash flow of its owned entities.

Over the last decade the value of a share of BRK has amplified 149%.  Pretty darn good, taking into account that DJIA (Dow Jones Industrial Average) has only improved 64%, and the S&P (Standard & Poors) 500 69%, in the same time. So for long-term investors, setting your money with Mr. Buffett would have done more than twice as good as buying one of these leading indices.

For this reason, many investors commend looking at what Berkshire Hathaway buys in its equity portfolio, and then buying those same stocks.  On the face of it, seems smart.  “Invest like Warren Buffet” one might say.

How have Mr. Buffett’s public equities performed?

It would be a cruel idea to buy the stocks Berkshire Hathaway owns.  Berkshire Hathaway’s value has minimum to do with the publicly traded equities it owns.  In fact, those holdings may be a hindrance on BRK’s valuation.

Of that giant portfolio, 4 equities make up 58% of the total holdings.  Let’s look at how those have done the last decade:

  • American Express (AXP,) about 10% of the portfolio, is up 83%
  • Coke (KO,) about 15% of the portfolio, is up 109%
  • IBM (IBM,) about 10% of the portfolio, is up 64%
  • Wells Fargo (WFC,) nearly 25% of the portfolio, is up 71%
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