Happy birthday, Warren Buffett! The great investor and chief of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) turns 80 years old today. Over the years, he's given many of us Fools a lot to be thankful for.
For one thing, many of us are shareholders of his ever-growing company. Over the past four and a half decades, Berkshire's book value has grown by an annual average of more than 20%, compared with roughly 9% for the S&P 500. Clearly, his formula of tying insurance companies to a variety of other businesses, and buying even more with all the cash they kick out is working well.
Happy birthday, Mr. B!
A decade ago, the denizens of our Berkshire discussion board shared birthday wishes for Buffett when he turned 70. (He was kind enough to thank us: "You're terrific to send along the birthday greetings which made me feel good indeed.") One community member thanked Buffett by saying, "I can sleep at night knowing you are on guard."
One of Buffett's greatest gifts to investors is that he can help all of us feel comfortable with our investments. He sticks within his circle of competence, seeks a margin of safety, aims to buy great companies at good prices, values dividend-paying stocks, and favors companies that offer predictable, important, and ideally repeat-purchase products and services.
Here are just a few of the companies packed into Berkshire's portfolio. As you'll see, they're not exactly high-risk ventures:
- Republic Services (NYSE: RSG) owns several hundred garbage-collection companies, along with more than 190 landfills and close to 80 recycling centers. As our population grows, so will our need to dispose of waste, ensuring a steady stream of customers for decades to come.
- Along the same lines, Buffett recently added Iron Mountain (NYSE: IRM) shares to his portfolio. Corporate America will likely need Iron Mountain's ability to store and manage critical records far into the future.
- USG (NYSE: USG), the sheetrock giant, also occupies a well-defended industry. It's unlikely that we'll soon be building or renovating buildings without wallboard. Buffett owns many companies related to homebuilding and renovation, including real estate brokerages and businesses focused on furniture, flooring, and paint.
- ConocoPhillips (NYSE: COP) and ExxonMobil are assured plenty of business until the world moves away from oil as a key energy source. By that time, these companies will likely sport alternative energy operations as well.
The gift of dividends
These stable, reliable companies also tend to pay out significant dividends -- the quarterly gifts that just keep giving. ExxonMobil and ConocoPhillips each pay 3% or more in yield. I've seen dividends mentioned as Buffett's secret weapon, but they hardly seem like such a secret. It's estimated that Berkshire rakes in considerably more than $1 billion annually in dividends.
Best of all, Buffett's many gifts are largely free. He shares his thoughts and experiences with the world regularly, most famously in his annual letters to shareholders. You might not often be the one receiving gifts when someone else has a birthday, but Buffett has been handing them out his whole life. I hope to keep getting them for many, many more years to come.
It may be a happy day for Buffett fans, but things aren't as rosy for the economy. Alex Dumortier recently looked at how Buffett's favorite indicator is pointing down.
