In the investing world, my #1 hero is Warren Buffett. The billionaire, based in Omaha, Nebraska, has amassed a $107.6bn fortune in 81 years of investing, beginning at age 11. Now 92, Buffett will give away 99% of his wealth in his lifetime. He’s already donated $49bn to good causes. What a great guy!
I’m backing Warren Buffett
As a lifelong fan of Buffett, it makes sense for me to buy into the business he runs with his long-time business partner Charlie Munger (96). This pair may be nonagenarians, but both are still whip-smart and rank among history’s best investors. Plus they have established a succession plan for when one or the other decides to step down.
Warren Buffett and Charlie Munger manage Berkshire Hathaway (NYSE: BRK.B), a $675bn mega-conglomerate ranked as the fifth-largest US-listed company. Berkshire (pronounced ‘Burkshire’ and not ‘Barkshire’) owns dozens of operating companies, as well as a massive portfolio of shares and other securities. This diverse set of businesses include a major railway, a battery maker, clothing and jewellery firms, and fast-moving consumer goods firms.
At Berkshire’s heart is a collection of insurance subsidiaries, because Buffett loves the economics of this industry. Insurers collect insurance premiums upfront, but pay claims later. This generates a ‘float’ of cash to be invested into assets to boost insurers’ returns. For example, Berkshire Hathaway’s float made the group $9bn in 2021. Handy, huh?
We’re betting on America
My wife and I bought six US growth stocks this month to hold for the long term (10+ years). These include four well-known tech mega-firms that rank #1 to #4 among the largest American corporations.
The fifth stock (US ranking #13) was a major US bank that could make big profits as interest rates rise. And the sixth and final US mega-cap stock we bought was the B shares of Berkshire Hathaway. We didn’t buy the A shares, simply because at $462,101 each, one share would cost us a hefty £391,691 (plus stamp duty and dealing fees). Whoa.
So now my wife is the owner of Berkshire Hathaway B shares. She doesn’t seem that enthused by this purchase, whereas I’m like an excited schoolboy. To know that Warren Buffett and Charlie Munger are working to build wealth for my family’s future genuinely thrills me.
Why buy Berkshire this month?
A few weeks ago, the US stock market was weakening, on fears of a Republican red wave in the midterm elections. In addition, investors were worried that the next inflation report might be a negative surprise. I took the opposing view, arguing that political and financial pundits were too pessimistic. Hence, we pulled the trigger, buying these six US stocks at reasonable, discounted prices.
As I write, Berkshire Hathaway B shares trade at $305.83, roughly midway between their 52-week range of $259.85 to $362.10. Fortunately, we bought in at about $20 below the current stock price, Thus, Buffett’s business has already delivered us an early paper profit. Yay.
Finally, thanks to soaring inflation, sky-high energy bills, and rising global interest rates, I expect tougher times for Berkshire and other US corporations in 2023. Indeed, corporate earnings might be depressed for some time. But I fully intend to back Warren Buffett until he dies or I do (I’m 54)!
Cliffdarcy has an economic interest in Berkshire Hathaway shares. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2022