Warren Buffett takes the trading floor before Berkshire Hathaway's annual meeting of shareholders on May 3, 2024 in Omaha, Nebraska.
David A. Grogen |
Warren Buffett turned 94 on Friday and his sprawling, unique conglomerate has never been worth more than it is today.
Berkshire-Hathaway This week, Berkshire's Class A shares also surpassed $700,000 per share for the first time.
Howard Marks, himself a great investor and friend of Buffett, attributes three things to the fact that the “Oracle of Omaha” was able to lead Berkshire to new heights even in his old age.
“It was a matter of a well-thought-out strategy pursued over seven decades with discipline, consistency and uncommon insight,” said Marks, co-founder and co-chairman of Oaktree Capital Management. “Discipline and consistency are important, but not enough. Without the uncommon insight, he clearly would not be the greatest investor in history.”
“His record is a testament to the power of compound interest at a very high rate over a very long period of time, without interruption. He never took a vacation,” Marks added.
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Berkshire-Hathaway
In the midst of the stock market boom of the 1960s, Buffett used an investment company he ran to buy a then-struggling New England textile company called Berkshire Hathaway. Today, his company is unrecognizable, with businesses ranging from Geico Insurance to BNSF Railway, a stock portfolio worth more than $300 billion, and a monstrous $277 billion cash fortress.
Breathtaking returns
Generations of investors who have studied and emulated Buffett's investing style have been amazed by his smart moves for decades. Coca Cola bet from the late 1980s was a lesson in patient value investing in strong brands with wide moats. Injecting a lifeline into Goldman Sachs in the depths of the financial crisis showed an opportunistic side during the crisis. Going all-in on Apple in recent years testifies to its flexibility in adapting its value approach to a new era.
Buffett made headlines earlier this month when he announced he had sold half of his Apple stake, marking somewhat the start of a hugely lucrative trade. (Although Apple is widely viewed as a growth stock, Buffett has long argued that any investment is a value investment — “You spend some money now to get more later.”)
Decades of strong returns followed like wildfire, and he has an unparalleled track record. Berkshire shares have returned 19.8% annually from 1965 to 2023, nearly double the S&P 500's return of 10.2%. Cumulatively, the stock has risen 4,384,748% since Buffett took office, compared to the S&P 500's return of 31,223%.
“He's the most patient investor ever, which is a big reason for his success,” said Steve Check, founder of Check Capital Management, whose biggest holding is Berkshire. “He can sit and sit and sit. Even at his age, when he doesn't have as much time left, he'll sit until he feels comfortable. I just think he's just going to do the best he can until the end.”
Buffett remains chairman and CEO of Berkshire, although Greg Abel, vice chairman of Berkshire's non-insurance operations and Buffett's designated successor, has taken on many responsibilities at the conglomerate. Earlier this year, Buffett said Abel, 62, would make all investment decisions after he leaves.
Buffett and Marks
Oaktree's Marks said Buffett has reinforced concepts that are integral to his own approach. Like Buffett, he is indifferent to macro forecasting and market timing; he relentlessly looks for value but stays within his own area of expertise.
Howard Marks, Co-Chairman, Oaktree Capital.
Courtesy of David A. Grogan | CNBC
“He doesn't care about timing the markets and trading, but when other people panic, he steps in. We try to do the same,” Marks said.
Buffett, who studied under Benjamin Graham at Columbia University, advised investors to view their stock holdings as small parts of a company. He believes that volatility is a big plus for the true investor, as it provides the opportunity to use emotional selling decisions to his advantage.
Oaktree has $193 billion in assets under management and has become one of the world's largest players in alternative investments, specializing in distressed debt and bargain hunting.
Marks, 78, has become a sharp, unequivocal voice of maverick thinking in the world of investors. His popular investment memos, which he has been writing since 1990, are now required reading on Wall Street and have even been praised glowingly by Buffett himself: “When I see Howard Marks' memos in my mail, they are the first thing I open and read. I always learn something.”
The two were introduced after Enron's collapse in the early 2000s. Marks revealed that Buffett ultimately inspired him to write his own book – The Most Important Thing: Uncommon Sense for the Thoughtful Investor – more than a decade earlier than he had originally planned.
“He was very generous with his comments. I don't think this book would have been written without his inspiration,” Marks said. “I had planned to write a book after I retired. But thanks to his encouragement, the book was published 13 years ago.”
Marks was also touched by Buffett's professional career and his ability to enjoy his work even at the age of over 90.
“He says he skips to work in the morning. He approaches investing with enthusiasm and joy,” Marks said. “I haven't retired yet and hope I never have to if I follow his example.”