Warren Buffett, the chairman and CEO of Berkshire Hathaway, is a figure synonymous with success in investment. Over the course of his illustrious career, Buffett’s strategic acumen and measured approach have led to unparalleled wins in the investment field. Among a myriad of investment decisions, five particular cases stand out as some of his most significant and successful investments.
- American Express (AXP):
Buffett first invested in American Express in 1963 after a major scandal known as the “Salad Oil Scandal” significantly impacted the company’s share price. Despite the setback, Buffett was confident in the enduring power of the American Express brand and its ability to bounce back. Investing $13 million for a 5% stake in the company, this deal was one of Buffett’s earliest significant investments. Today, Berkshire Hathaway holds an approximated 18.8% stake in American Express, which was worth $20 billion as of 2021. This long-term investment is an apt representation of Buffett’s value investing principles.
- Coca-Cola (KO):
Another gem in Buffett’s portfolio is Coca-Cola. The legendary investor first bought a stake in the beverage giant in 1988, following the 1987 market crash. Buffett invested $1.02 billion for a 6.2% stake, recognizing the timeless value of the brand and its vast global reach. Fast-forward to today, and Berkshire Hathaway’s stake in Coca-Cola has grown to nearly 10%, valued at more than $22 billion in 2021. Beyond the numbers, the Coca-Cola investment epitomizes Buffett’s belief in investing in what you know and understand.
- Geico:
In 1951, Buffett discovered Geico, falling in love with the business model. However, it wasn’t until the late 70s that he began buying the stock heavily. By 1995, Berkshire Hathaway had acquired the entire company. Geico’s direct-to-consumer model was innovative at the time and it offered a significant cost advantage over competitors. This investment showcases Buffett’s ability to identify and capitalize on efficient, innovative business models.
- See’s Candies:
In 1972, Buffett purchased See’s Candies for $25 million. This marked a significant shift in his investment philosophy, moving from buying mediocre companies at fantastic prices to buying fantastic companies at mediocre prices. While not the largest in terms of total value, the acquisition of See’s Candies has brought in cumulative pre-tax earnings exceeding $2 billion. Buffett often cites this as one of his favorite investments, for it taught him the power of brands and the ‘moat’ concept – a business’s ability to maintain competitive advantages over its competitors to protect its long-term profits and market share.
- Apple Inc. (AAPL):
Apple represents one of the most successful recent investments by Berkshire Hathaway. Despite Buffett’s renowned aversion to technology stocks, he began buying Apple shares in 2016, recognizing the strength of Apple’s ecosystem, its brand loyalty, and its robust cash flow generation. By 2021, Berkshire Hathaway owned roughly 5.4% of Apple, with its stake valued at over $120 billion. It shows that even a seasoned investor like Buffett can adapt his investing principles in light of changing market landscapes.
In conclusion, Warren Buffett’s best investments offer crucial insights into his investment philosophy. They reveal a disciplined approach focused on understanding a business thoroughly, acknowledging the value of strong brands, recognizing and adhering to long-term investment principles, and the ability to adapt when necessary. From American Express in the early ’60s to Apple in the 21st century, Buffett’s successes provide a roadmap for both new and experienced investors navigating the complexities of the financial markets. Each investment carries its unique lesson, but all underscore the importance of patience, conviction, and the courage to buck the trend when necessary.
