Warren Buffett walks the floor before Berkshire Hathaway’s Annual Shareholders Meeting in Omaha, Nebraska on May 3, 2024.
David A. Grogen CNBC
Warren Buffett turned 94 on Friday and the one-time conglomerate is worth more than ever.
Berkshire Hathaway became the first nontech company to hit $1 trillion in market capitalization this week. Berkshire Class A shares also topped $700,000 each for the first time.
Howard Marks, a great investor in his own right and a friend of Buffett, credits three things that have allowed the “Oracle of Omaha” to lead Berkshire to new heights, even in his advanced age.
“This is a well-thought-out strategy that has been pursued over seven decades with extraordinary discipline, consistency and foresight,” said Marks, founder and chairman of Oaktree Capital Management. “Discipline and consistency are important, but not enough. Without extraordinary insight, he would not have become the greatest investor in history.”
“His record is a testament to the power of compounding at a very high level for a very long time, uninterrupted. He never took a day off,” added Marks.
Berkshire Hathaway
In the midst of the stock market go-go of the 1960s, Buffett used an investment partnership he made to buy what would later become a failed New England textile company named Berkshire Hathaway. Today, his company is unrecognizable from its past, with businesses ranging from Geico insurance to BNSF Railway, an equity portfolio of more than $300 billion and a cash stronghold of $277 billion.
The eye-popping returns
Generations of investors who have studied and emulated Buffett’s investing style have admired his shrewd moves for decades. At Coca-Cola inside of the late 1980s made a lesson for the value of patience investing in strong brands with wide moats. Inject lifeline investment in Goldman Sachs in the depth of the financial crisis shows the opportunistic side of the crisis. Going all in Apple in the new year he said flexibility in adopting a value approach for the new age.
Buffett made headlines earlier this month by announcing he had dumped half of his Apple holdings, ringing the bell in a highly profitable trade. (While Apple is considered a growth stock, Buffett has long argued that all investments are value investments — “You put money in now to make more money later.”)
Decades of good snow have been produced and they have achieved an unrivaled track record. Berkshire’s stock has returned 19.8% annually from 1965 to 2023, nearly double the 10.2% return of the S&P 500. Cumulatively, the stock is up 4,384,748% since Buffett took over, compared to the S&P 50223% return of 31.
“He’s the most patient investor, which is a big reason for his success,” said Steve Check, founder of Check Capital Management with Berkshire as the largest holding. “He can sit and sit and sit. Even though he’s not old enough to sit, he’ll sit until he’s comfortable. I just think he’ll continue to do his best until the end. .”
Buffett remains Berkshire’s chairman and CEO, although Greg Abel, vice chairman of Berkshire’s non-insurance operations and Buffett’s designated successor, has assumed much of the responsibility at the conglomerate. Earlier this year, Buffett said Abel, 62, would make all investment decisions in his absence.
Buffett and Marks
Oaktree’s Marks says Buffett reinforces a concept that is integral to his own approach. Like Buffett, he doesn’t care about macro forecasts and market timing; he searches for value relentlessly, while staying within his own circle of competence.
Howard Marks, co-chairman, Oaktree Capital.
Courtesy David A. Grogan CNBC
“They don’t care about timing the market and trading, but when other people get scared, they step in. We’re trying to do the same thing,” Marks said.
Buffett, who studied at Columbia University under Benjamin Graham, has advised investors to view stock ownership as a small business. He believes volatility is a huge plus for real investors because it gives him the opportunity to take advantage of emotional selling.
Oaktree, with $193 billion in assets under management, has become one of the world’s largest alternative investment players, specializing in lending and fundraising.
Marks, 78, has become a clear and unequivocal contrarian voice in the investment world. The popular investment memo, which he began writing in 1990, is now considered required reading on Wall Street and even received a glowing endorsement from Buffett himself – “When I saw the memo from Howard Marks in my mail, he was the first to open it and read it.” I’m always learning.
The two were introduced after Enron’s bankruptcy in the early 2000s. Marks revealed that Buffett ultimately motivated him to write his own book – “The Most Important Thing: Uncommon Sense for the Thoughtful Investor” – over a decade ahead of his own schedule.
“He was very generous with his comments. I don’t think the book would have been written without his inspiration,” Marks said. “I had planned to write a book when I retired. But on a whim, it was published 13 years ago.”
Buffett’s trajectory and his ability to enjoy what he was doing in the ’90s resonated well with Marks.
“He said that he skips to work in the morning. He tackles investing with gusto and joy,” said Marks. “I still haven’t retired, and I hope I never do, following his example.”
