The Simple Way Warren Buffett Made 1000%

Warren Buffett has turned $2.9 billion into almost $35 billion through investments in Coca-Cola, Procter & Gamble, and American Express, and Buffett himself tells you how to repeat his success.

Mar 9, 2014 at 1:34PM


Photo credit: Georgetown

Warren Buffett and Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) recently released the annual report and reveal how the famed investor raked in billions via the stock market.

The report from Berkshire Hathaway is always fun to navigate. The immense amount of businesses at Berkshire Hathaway -- from insurance companies to railroads and seemingly everything in between -- plus the insightful quips from Buffett himself, make it worth the read. Yet one table revealed a staggering win for Buffett.

A sizable return
The holdings of Warren Buffet and Berkshire Hathaway are well known, as it has a nearly $22 billion position in Wells Fargo, a $16.5 billion stake in Coca-Cola (NYSE:KO), an American Express (NYSE: AXP) investment worth $13.8 billion, and an IBM holding of $12.8 billion. These four companies are affectionately known as the "Big Four."

Yet what is not well-known is exactly how much Berkshire Hathaway paid for these stocks. The total value of stocks held by Berkshire Hathaway stands at a staggering $117.5 billion, but it only paid $59.5 billion, meaning in total Berkshire Hathaway has essentially doubled its money. In addition, what has also been truly remarkable is those unrealized gains grew by more than 55%, or $21 billion in the last year alone: 

Source: Company Investor Relations.

While a doubling of money is truly impressive, there are three stocks Buffett has invested in that have generated a return of 1080%.

The real winners
Two of the biggest winners are actually among the big four at Berkshire Hathaway, including Coca-Cola and American Express, but the third company is one which is known by many, but often excluded when discussing what Berkshire owns: Procter & Gamble (NYSE:PG). As shown in the chart below, it fractionally trails Coca-Cola as Warren Buffett's best investment:

Source: Company Investor Relations.

In addition, those figures represent the change in the market value of the stock price, and do not include the dividends to reveal the total return on the investment. Just in the instance of Coca-Cola, Buffett began buy shares of the company in 1988 and continually added to it until 1994. But since the initial investment, it has delivered a staggering total return of more than 2,500%. 


Source: HomeServicesAmerica.

What we can learn
At times, it is often thought tremendous returns can only be made on picking the next under-the-radar company or hot start-up. Yet Buffett shows us the best investments are those made in high quality companies with established market leadership and strong management teams.

In his Berkshire Hathaway stock owner's manual, which he released in 1996, he said:

As owners of, say, Coca-Cola or American Express shares, we think of Berkshire as being a non-managing partner in two extraordinary businesses, in which we measure our success by the long-term progress of the companies rather than by the month-to-month movements of their stocks. In fact, we would not care in the least if several years went by in which there was no trading, or quotation of prices, in the stocks of those companies. If we have good long-term expectations, short-term price changes are meaningless for us except to the extent they offer us an opportunity to increase our ownership at an attractive price.

All too often we can be trapped into thinking short term price fluctuations would be reasons to buy or sell a stock, but as Buffett clearly shows, the best investments are those in made "extraordinary businesses," with "long-term expectations."

More wisdom from Warren
While its value is seemingly infinite, the price of Warren Buffett's wisdom is thankfully free. He is one of the greatest investors ever and through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway worth billions. If you want more from Buffett, now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Patrick Morris owns shares of Berkshire Hathaway and Coca-Cola. The Motley Fool recommends American Express, Berkshire Hathaway, Coca-Cola, and Procter & Gamble. The Motley Fool owns shares of Berkshire Hathaway and Coca-Cola and has the following options: long January 2016 $37 calls on Coca-Cola and long January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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