Latest news with #OracleofOmaha
Globe and Mail
2 days ago
- Business
- Globe and Mail
Warren Buffett Spent $78 Billion Buying This Stock Over 6 Years -- but He's Now Gone 12 Straight Months Without Purchasing a Single Share
Key Points Warren Buffett's No. 1 stock to buy won't be found in Berkshire Hathaway's quarterly 13F filings. Following changes made by Berkshire's board in mid-2018, Buffett piled nearly $78 billion of his company's capital into one stock in just six years. However, Buffett's lack of enthusiasm toward his favorite stock over the last year signals just how much of a diehard value investor he is. 10 stocks we like better than Berkshire Hathaway › There isn't a money manager on Wall Street who commands the attention of professional and everyday investors quite like Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett. The affably dubbed "Oracle of Omaha," who's set to step down from the CEO role by the end of the year, has delivered a nearly 5,750,000% cumulative return in his company's Class A shares (BRK.A) since grabbing the reins six decades ago. Even though Buffett is fallible, it hasn't stopped investors from riding his coattails to phenomenal long-term gains. Berkshire's billionaire chief has demonstrated a knack for finding great deals hiding in plain sight. Usually, quarterly filed Form 13Fs allow investors to track Buffett's investment activity. This filing, which is required of institutional investors with at least $100 million in assets under management, offers a concise snapshot of which stocks top-tier asset managers have been buying and selling. But what you might find surprising is that Warren Buffett's favorite stock to buy -- a company he deployed close to $78 billion into since mid-2018 -- isn't listed in Berkshire Hathaway's 13F filings. Warren Buffett once purchased his favorite stock for 24 consecutive quarters A quick glance at the $281 billion investment portfolio the Oracle of Omaha oversees at Berkshire Hathaway would lead investors to believe that one of his company's core holdings -- Apple, American Express, Bank of America, and Coca-Cola -- must be his favorite stock. But in reality, none of these companies comes close to the almost $78 billion Buffett has dropped buying shares of his No. 1 stock. To find a detailed history of Buffett's buying activity for his favorite stock, you'll need to peruse Berkshire Hathaway's quarterly operating results. On the final page of each quarterly report, just prior to the executive certifications, you'll find detailed purchasing activity of the stock Buffett holds nearest and dearest to his heart. I'm talking about Berkshire Hathaway. Prior to July 2018, Warren Buffett and now-late right-hand man Charlie Munger had their proverbial hands tied when it came to share repurchases. The rules governing buybacks only allowed for repurchases if Berkshire Hathaway stock fell to or below a 20% premium to book value (i.e., 120% of book value). Since Berkshire stock never dipped below this line-in-the-sand threshold, not one penny was used for buybacks. On July 17, 2018, Berkshire Hathaway's board amended the buyback rules to give Buffett and Munger more liberty to deploy capital for repurchases. These new mandates allowed repurchases to be undertaken with no ceiling or end date, as long as the company has at least $30 billion in combined cash, cash equivalents, and U.S. Treasuries, and Buffett believes his company's stock is intrinsically cheap. In the wake of this change, Berkshire's billionaire boss repurchased his company's stock with a purpose. For 24 consecutive quarters (a six-year stretch spanning July 17, 2018, to June 30, 2024), Buffett spent almost $78 billion to retire approximately 12.5% of Berkshire's outstanding shares. In addition to buybacks incentivizing long-term investing, they've had a noticeably positive impact on Berkshire Hathaway's earnings per share. The Oracle of Omaha has gone cold turkey on his No. 1 stock (and there's a good reason why) However, there's been a night-and-day difference to Buffett's approach with his favorite stock over the last year. During the third quarter of 2024, he didn't purchase a single share of Berkshire Hathaway for the first time in 25 quarters. But this wasn't an anomaly -- it was the start of a trend. Based on Berkshire Hathaway's second-quarter operating report, which was filed on Saturday, Aug. 2, Buffett has now gone 12 consecutive months without spending a dime on share buybacks. The reason for this change of heart appears to boil down to one of the very few variables the Oracle of Omaha doesn't waver on: valuation. During the 24-quarter period where share buybacks were being undertaken on an almost-monthly basis, Berkshire Hathaway stock was pretty consistently trading between a 30% and 50% premium to book value. But for much of the previous four quarters, Berkshire stock has hovered between a 60% and 75% premium to its book value. Warren Buffett has consistently demonstrated a willingness to sit on his hands and wait for valuations to come into his wheelhouse -- and this apparently applies to his own company's stock as well. Berkshire's billionaire chief choosing to go cold turkey on his No. 1 stock speaks to the broader theme of the market being historically pricey. JUST IN 🚨: Warren Buffet Indicator jumps to most expensive stock market valuation in history, surpassing the Dot Com Bubble and the Global Financial Crisis 👀 -- Barchart (@Barchart) July 25, 2025 In a 2001 interview with Fortune magazine, Buffett referred to the market-cap-to-GDP ratio as "probably the best single measure of where valuations stand at any given moment." This ratio, which adds up the value of all public companies and divides it by U.S. gross domestic product (GDP), is now known as the "Buffett Indicator." Back-testing the Buffett Indicator to 1970 reveals an average market-cap-to-GDP ratio of 85%. This is to say that the cumulative value of tradable stocks equates to 85% of U.S. GDP. In late July, the Buffett Indicator hit an all-time high of more than 210%! Based on Buffett's favorite valuation measure, the stock market has never been pricier. To build on this point, Berkshire's boss has been a net seller of stocks for 11 consecutive quarters, to the tune of $177.4 billion. Not repurchasing Berkshire Hathaway stock is simply an extension of the overall stock market offering very few deals at the moment. If there's a silver lining here, it's that being patient and waiting for price dislocation to crop up is something Warren Buffett and his top advisors are excellent at. With more than $344 billion in combined cash, cash equivalents, and U.S. Treasuries on Berkshire's balance sheet, there's more than enough firepower to be aggressive when the time comes. Eventually, share buybacks will recommence. Realistically, it may not happen before Warren Buffett makes his exit as CEO. Should you invest $1,000 in Berkshire Hathaway right now? Before you buy stock in Berkshire Hathaway, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $631,505!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,103,313!* Now, it's worth noting Stock Advisor's total average return is 1,039% — a market-crushing outperformance compared to 181% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025
Yahoo
3 days ago
- Business
- Yahoo
The 1 Stock Warren Buffett Definitely Didn't Buy in Q2
Key Points There are lots of likely candidates that Buffett didn't buy last quarter. However, we can know for sure that Buffett didn't buy one stock in Q2. While Buffett isn't buying this stock, it could be a good pick for other investors. 10 stocks we like better than Berkshire Hathaway › Warren Buffett plans to step down as CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) at the end of this year. However, that doesn't change the level of scrutiny his stock picks receive in the least. Many investors remain highly interested in knowing which stocks the "Oracle of Omaha" is buying. We won't know the stocks Buffett bought in the second quarter of 2025 for another couple of weeks or so. Berkshire typically submits the 13F regulatory filing disclosing its equity holdings for the second quarter in mid-August of each year. However, there's one stock that the legendary investor definitely didn't buy in Q2. Lots of likely candidates Before we get to that one stock, I'll readily admit there are lots of likely candidates that Buffett didn't buy last quarter. Valuation alone would disqualify a boatload of stocks. For example, Palantir Technologies sports a forward price-to-earnings ratio of around 278. The odds against Buffett buying a stock trading at such a premium are slim. I think the likelihood that Buffett initiated new positions in stocks for which he recently exited positions is also very low. Berkshire sold all of its remaining shares of Citigroup and Nu Holdings in the first quarter of 2025. It would be quite surprising if Buffett or his investment managers turned around and bought these two stocks again in Q2. Berkshire's 10Q filing for the second quarter, which was released over the weekend, also provided big hints about other stocks that Buffett probably didn't buy. For example, Berkshire recorded an impairment of $5 billion on its investment in Kraft Heinz. Could the conglomerate have put more money in a stock that has lost it so much money? It's theoretically possible, but not probable. Another likely candidate that Buffett probably didn't buy is American Express. Berkshire revealed in its latest quarterly update that it owned 151.6 million shares of the financial services giant at the end of Q2. At the end of Q1, Berkshire owned 151,610,700 shares of American Express. Maybe Buffett added a small number of AmEx shares in Q2, but I doubt it. The slam-dunk stock that Buffett didn't buy in Q2 The above list of potential stocks that Buffett didn't buy in Q2 isn't exhaustive by any means. However, there's one slam-dunk stock that Buffett didn't buy in Q2: Berkshire Hathaway itself. Berkshire's 10Q for the second quarter stated bluntly, "There were no share repurchases during the first six months of 2025." Buffett has loved stock buybacks in the past. Berkshire's buyback program allows him to authorize repurchasing shares any time he wants, as long as the company's cash, cash equivalents, and U.S. Treasury bill holdings don't fall below $30 billion. With Berkshire's cash position at $344 billion, Buffett could have bought back shares if he chose to do so. So why didn't he? Buffett is probably concerned about Berkshire's valuation. The stock repurchase program allows Buffett to initiate share buybacks when he "believes that the repurchase price is below Berkshire's intrinsic value." Even though Berkshire's share price has fallen more than 10% from its peak earlier this year, the stock still trades at 23.4 times forward earnings and is above its levels throughout most of 2024. An excise tax of 1% on stock buybacks that went into effect in 2023 probably also factors into Buffett's reluctance to repurchase shares. He even mentioned this during Berkshire's annual shareholder meeting in May 2025, stating, "If Berkshire buys Berkshire shares in repurchases, we now pay more than you will pay if you buy Berkshire shares." Buffett added that the excise tax "hurts some of our investee companies quite substantially." Is Berkshire Hathaway a good pick for other investors? As Buffett said, ordinary investors aren't affected by the excise tax. Is Berkshire Hathaway a good pick even though it's not buying back its own shares? I think so. Granted, the stock's valuation looks high at first glance. However, I don't think that's a concern for long-term investors considering Berkshire's growth prospects. Some might be worried about Buffett stepping down as CEO. He still plans to be actively involved as chairman of the board, though. Importantly, Buffett is confident in the abilities of his successor, Greg Abel, telling shareholders earlier this year that he doesn't plan on selling a single share. He also expressed his view that Berkshire's prospects will be better with Abel as CEO. Buffett definitely isn't buying Berkshire Hathaway these days. But that doesn't mean you shouldn't. Should you buy stock in Berkshire Hathaway right now? Before you buy stock in Berkshire Hathaway, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Berkshire Hathaway wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025 American Express is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway and Palantir Technologies. The Motley Fool recommends Kraft Heinz and Nu Holdings. The Motley Fool has a disclosure policy. The 1 Stock Warren Buffett Definitely Didn't Buy in Q2 was originally published by The Motley Fool
Globe and Mail
3 days ago
- Business
- Globe and Mail
The 1 Stock Warren Buffett Definitely Didn't Buy in Q2
Key Points There are lots of likely candidates that Buffett didn't buy last quarter. However, we can know for sure that Buffett didn't buy one stock in Q2. While Buffett isn't buying this stock, it could be a good pick for other investors. 10 stocks we like better than Berkshire Hathaway › Warren Buffett plans to step down as CEO of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) at the end of this year. However, that doesn't change the level of scrutiny his stock picks receive in the least. Many investors remain highly interested in knowing which stocks the "Oracle of Omaha" is buying. We won't know the stocks Buffett bought in the second quarter of 2025 for another couple of weeks or so. Berkshire typically submits the 13F regulatory filing disclosing its equity holdings for the second quarter in mid-August of each year. However, there's one stock that the legendary investor definitely didn't buy in Q2. Lots of likely candidates Before we get to that one stock, I'll readily admit there are lots of likely candidates that Buffett didn't buy last quarter. Valuation alone would disqualify a boatload of stocks. For example, Palantir Technologies sports a forward price-to-earnings ratio of around 278. The odds against Buffett buying a stock trading at such a premium are slim. I think the likelihood that Buffett initiated new positions in stocks for which he recently exited positions is also very low. Berkshire sold all of its remaining shares of Citigroup and Nu Holdings in the first quarter of 2025. It would be quite surprising if Buffett or his investment managers turned around and bought these two stocks again in Q2. Berkshire's 10Q filing for the second quarter, which was released over the weekend, also provided big hints about other stocks that Buffett probably didn't buy. For example, Berkshire recorded an impairment of $5 billion on its investment in Kraft Heinz. Could the conglomerate have put more money in a stock that has lost it so much money? It's theoretically possible, but not probable. Another likely candidate that Buffett probably didn't buy is American Express. Berkshire revealed in its latest quarterly update that it owned 151.6 million shares of the financial services giant at the end of Q2. At the end of Q1, Berkshire owned 151,610,700 shares of American Express. Maybe Buffett added a small number of AmEx shares in Q2, but I doubt it. The slam-dunk stock that Buffett didn't buy in Q2 The above list of potential stocks that Buffett didn't buy in Q2 isn't exhaustive by any means. However, there's one slam-dunk stock that Buffett didn't buy in Q2: Berkshire Hathaway itself. Berkshire's 10Q for the second quarter stated bluntly, "There were no share repurchases during the first six months of 2025." Buffett has loved stock buybacks in the past. Berkshire's buyback program allows him to authorize repurchasing shares any time he wants, as long as the company's cash, cash equivalents, and U.S. Treasury bill holdings don't fall below $30 billion. With Berkshire's cash position at $344 billion, Buffett could have bought back shares if he chose to do so. So why didn't he? Buffett is probably concerned about Berkshire's valuation. The stock repurchase program allows Buffett to initiate share buybacks when he "believes that the repurchase price is below Berkshire's intrinsic value." Even though Berkshire's share price has fallen more than 10% from its peak earlier this year, the stock still trades at 23.4 times forward earnings and is above its levels throughout most of 2024. An excise tax of 1% on stock buybacks that went into effect in 2023 probably also factors into Buffett's reluctance to repurchase shares. He even mentioned this during Berkshire's annual shareholder meeting in May 2025, stating, "If Berkshire buys Berkshire shares in repurchases, we now pay more than you will pay if you buy Berkshire shares." Buffett added that the excise tax "hurts some of our investee companies quite substantially." Is Berkshire Hathaway a good pick for other investors? As Buffett said, ordinary investors aren't affected by the excise tax. Is Berkshire Hathaway a good pick even though it's not buying back its own shares? I think so. Granted, the stock's valuation looks high at first glance. However, I don't think that's a concern for long-term investors considering Berkshire's growth prospects. Some might be worried about Buffett stepping down as CEO. He still plans to be actively involved as chairman of the board, though. Importantly, Buffett is confident in the abilities of his successor, Greg Abel, telling shareholders earlier this year that he doesn't plan on selling a single share. He also expressed his view that Berkshire's prospects will be better with Abel as CEO. Buffett definitely isn't buying Berkshire Hathaway these days. But that doesn't mean you shouldn't. Should you invest $1,000 in Berkshire Hathaway right now? Before you buy stock in Berkshire Hathaway, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025
Yahoo
4 days ago
- Business
- Yahoo
Warren Buffett's $177 Billion Warning to Wall Street Is Deafening and Unmistakable
Key Points Between Oct. 1, 2022 and June 30, 2025, Warren Buffett has overseen more than $177 billion in net stock sales. Though Berkshire Hathaway's billionaire chief would never bet against America, he's having a difficult time finding value in a historically pricey stock market. Patience plays a big role in Warren Buffett's investment strategy -- and his shareholders have reaped the rewards of this approach for decades. 10 stocks we like better than Berkshire Hathaway › In May, Wall Street's most-followed money manager, Berkshire Hathaway's (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett, made waves by announcing his intent to retire from the role of CEO by the end of the year. While not unexpected -- Buffett will turn 95 on Aug. 30 -- it nevertheless raises eyebrows given the Oracle of Omaha's outstanding investment track record, where he's overseen a cumulative return of nearly 5,750,000% in his company's Class A shares (BRK.A) spanning six decades. However, Buffett's pending retirement from day-to-day operations is, arguably, not the biggest story right now at Berkshire Hathaway. On Saturday, Aug. 2, Berkshire lifted the hood on its second-quarter operating results. While the report undeniably cautioned investors that U.S. tariffs would impact its operations (presumably in a bad way), Berkshire Hathaway's consolidated cash flow statement was the most important piece of information. Though investors look to Warren Buffett for his ability to spot amazing deals hiding in plain sight, with some aiming to mirror his buying activity, the hard truth is that Berkshire's billionaire chief has been a net seller of stocks for 11 consecutive quarters. Warren Buffett's $177 billion warning to Wall Street has become deafening In less than two weeks, following the close of trading on Aug. 14, Berkshire Hathaway will file Form 13F with the Securities and Exchange Commission. This is a required quarterly filing for institutional investors with at least $100 million in assets under management that allows investors to see which stocks Wall Street's smartest money managers have been buying and selling. Even though we don't yet know all of the stocks Buffett and his top advisors, Todd Combs and Ted Weschler, were buying and selling during the June-ended quarter, Berkshire's cash flow statement paints a very clear picture of how Buffett and his team approached their buying and selling activity. On page 6 of Berkshire's quarterly operating results, under "Cash flows from investing activities," you'll find the two most important line items of interest: "purchases of equity securities" and "sales of equity securities." During the second quarter, $3.909 billion was spent buying stocks, which is actually an uptick from the $3.183 billion spent buying stocks in the March-ended quarter. However, $6.915 billion, in aggregate, was sold, which is also higher than the $4.677 billion sold in the first quarter. On a net basis, Buffett oversaw $3.006 billion more in stock sales than purchases. Over the past 11 quarters (33 months), Warren Buffett has overseen: Q4 2022: $14.64 billion in net-equity sales Q1 2023: $10.41 billion Q2 2023: $7.981 billion Q3 2023: $5.253 billion Q4 2023: $0.525 billion Q1 2024: $17.281 billion Q2 2024: $75.536 billion Q3 2024: $34.592 billion Q4 2024: $6.713 billion Q1 2025: $1.494 billion Q2 2025: $3.006 billion Altogether, Buffett has sold $177.431 billion more in stocks than he's purchased since Oct. 1, 2022 -- and it represents an unmistakable and deafening warning to Wall Street. The Oracle of Omaha is struggling to find value in a historically pricey stock market Lengthy books have been written about Warren Buffett's investment philosophy and his laundry list of unwritten rules. But only two of these rules are unbreakable: Buffett won't ever bet against America; and Getting a good deal is vital. Keeping the first rule in mind (i.e., he's never going to short-sell stocks or buy put options against Wall Street's major stock indexes), the issue facilitating the Oracle of Omaha's 11-quarter stock-selling streak is that value has become almost impossible to find in the market. For example, the market-cap-to-GDP ratio, which has affably come to be known as the "Buffett Indicator," hit an all-time high a little over one week ago. This ratio, which adds up the value of all publicly traded companies and divides that amount by U.S. gross domestic product (GDP), has historically averaged 85%, when back-tested to 1970. But in late July, it topped 210%! It's a similar story for the S&P 500's (SNPINDEX: ^GSPC) Shiller price-to-earnings (P/E) Ratio, which is also known as the cyclically adjusted P/E Ratio, or CAPE Ratio. Unlike the traditional P/E ratio, which divides a company's share price by its trailing-12-month earnings, the Shiller P/E is based on average inflation-adjusted earnings over 10 years. Accounting for a decade of earnings history, as opposed to just 12 months, ensures that shock events and economic downturns can't skew the results. The S&P 500's Shiller P/E Ratio has been back-tested to January 1871 and sports an average multiple of 17.26. In late July, this multiple hit a closing value of 38.97, which made this the third-priciest continuous bull market in history. For some added context, the previous five instances where the Shiller P/E topped and sustained 30 were eventually followed by declines in the benchmark S&P 500 of at least 20%, if not substantially higher. Despite Warren Buffett having a near-record amount of cash at his disposal, there's simply no incentive for he or his team to aggressively deploy this capital given how historically pricey the stock market is at the moment. Patience is part of Buffett's investment strategy -- and it's paid off handsomely throughout the years For some investors, the Oracle of Omaha's willingness to sit on his hands and allow Berkshire Hathaway's cash pile to grow to more than $344 billion is unnerving. Historically, Buffett's greatest wealth-creating moments have come from investing his company' capital or making game-changing acquisitions. But make no mistake about it -- patience is built into Buffett's investment strategy, and it's paid off handsomely for his shareholders spanning six decades. No matter how amazing a company's management team or capital-return program happens to be, Berkshire's chief is going to stand pat if he doesn't believe he's getting a good deal. Waiting on price dislocations to materialize has been something of a calling card of success for Buffett during his tenure as CEO. Arguably one of the top examples of Berkshire's soon-to-be-retiring chief pouncing on a phenomenal deal hiding in plain sight is his $5 billion purchase of Bank of America (NYSE: BAC) preferred stock in August 2011. Though Bank of America wasn't thirsty for capital at the time, it was still working its way back from the depths of the financial crisis. Berkshire was able to infuse one of America's largest banks by assets with $5 billion in capital in exchange for preferred BofA stock. However, the crown jewel of this transaction was the warrants Berkshire received that allowed Buffett to pull the trigger on up to 700 million common shares of Bank of America stock at a $7.14 exercise price. When the entirety of these warrants was exercised in mid-2017, Berkshire enjoyed an instant windfall of $12 billion. Price dislocations in amazing businesses don't occur on a daily basis, and they're even scarcer when the stock market is historically pricey. While Buffett successor Greg Abel may be the one that eventually deploys Berkshire's treasure chest, understand that being patient is part of the plan and a key ingredient to Berkshire Hathaway's long-term success. Do the experts think Berkshire Hathaway is a buy right now? The Motley Fool's expert analyst team, drawing on years of investing experience and deep analysis of thousands of stocks, leverages our proprietary Moneyball AI investing database to uncover top opportunities. They've just revealed their to buy now — did Berkshire Hathaway make the list? When our Stock Advisor analyst team has a stock recommendation, it can pay to listen. After all, Stock Advisor's total average return is up 1,019% vs. just 178% for the S&P — that is beating the market by 841.12%!* Imagine if you were a Stock Advisor member when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* The 10 stocks that made the cut could produce monster returns in the coming years. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025 Bank of America is an advertising partner of Motley Fool Money. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy. Warren Buffett's $177 Billion Warning to Wall Street Is Deafening and Unmistakable was originally published by The Motley Fool
Yahoo
5 days ago
- Business
- Yahoo
How Warren Buffett Would Likely Build Wealth on a $50,000 Salary
Legendary investor Warren Buffett is well known for making a lot of money for shareholders of his conglomerate Berkshire Hathaway, and, since he owns nearly a third of the company, for himself. But the so-called Oracle of Omaha wasn't born wealthy, and has a well-deserved reputation for frugality. He has lived in the same house since 1958, which is presently worth about $650,000. Buffett started small, and you can too. Here's what you need to know about how Warren Buffett would likely build wealth today on a $50,000 salary. Check Out: Read Next: Live as Though You Have a $40,000 Salary Living beneath your means is a tenet of nearly every successful investor. In order to build wealth, you have to have money to invest. The only way to do this is to spend less than you earn, so you can invest the rest. This doesn't mean just investing whatever cash you happen to have left over, however. Saving and investing must be intentional. If you are earning $50,000 but spending as though you earn $40,000, you'll have money you can put to work by investing. Buffett believes in spending on things that will last, not on the latest trends. He spends cash instead of using credit, especially for discretionary items. Cash makes spending more 'real,' so you're more likely to think about whether you need the item than you would if you were using a credit card. Learn More: Make Small Investments in Small Companies The advantage that small investors have is that they can invest in small companies, which have the potential to become much larger. Someone who made a small investment in a company like Apple or IBM when it first started out is very wealthy now, provided they held on to the investment. Small investments also give you the opportunity to invest in more different companies, reducing the chances that a poor performance by one company would have a significant negative impact on your portfolio. Look For Value Buffett has long espoused the advantages of value investing — buying companies that are undervalued by the market and holding onto them until the market catches up. Buffett recommends looking for a 'margin of safety,' which is the difference between earnings and fixed costs. If the company's market capitalization (outstanding shares times share price) is less than its intrinsic value, it has a margin of safety. The larger the margin, the more attractive the stock. Estimating intrinsic value is part science and part art, as you need to account for not only assets, dividends and earnings, but the company's future prospects. Capitalize When You Can, but Don't Buy Just Because Everyone Else Is Buffett's most famous quote may be, 'Be fearful when others are greedy, and greedy when others are fearful.' On its face, this quote means that during times of panic-selling, there are often bargains to be had as stocks trade below their intrinsic value, and that it's OK to wait on the sidelines while other investors drive up prices. But the underlying lesson in this quote is to take the emotion out of investing. Don't follow the crowd, and don't get swept up in panic-buying or panic-selling. And remember that it's OK to do nothing. Invest Consistently and for the Long Term This isn't Buffett-specific advice, but his track record certainly indicates that he adheres to it. Even if the amount you are able to invest is small, if you do it consistently and thoughtfully, and hold your positions for the long term, you could be looking at a portfolio that would make the Oracle of Omaha proud. More From GOBankingRates 6 Big Shakeups Coming to Social Security in 2025 This article originally appeared on How Warren Buffett Would Likely Build Wealth on a $50,000 Salary Sign in to access your portfolio
