My heroes are an eclectic bunch. They include mathematicians (Gauss and Ramanujan), physicists (Feynman and Hawking) and computer scientists (Turing and Wozniak). In the financial world, I have one particular hero: Warren Buffett.
Why I love Warren Buffett
It may be odd to have a mega-billionaire investor and CEO as a personal hero. But I find it bizarre that people worship celebrities and influencers. To me, these ‘famous’ people are NUTS — Not Useful To Society!
Warren Buffett is my role model because he has used established techniques over decades to make himself and his investors wealthy. Like me, the Oracle of Omaha is a value investor buying quality assets at reasonable prices and, ideally, owning them forever.
Also like me, Buffett has little interest in material possessions. He lives in a modest house and drives an ordinary car. He has a simple diet, preferring cheeseburgers and Cherry Coke to posh nosh. He’s also an incredibly generous donor to good causes. After having given away almost $50bn, he’s still left with a $109bn personal fortune.
We invested in Berkshire Hathaway
To capture Warren Buffett’s legendary investing skill, my wife recently bought shares in his mega-conglomerate, Berkshire Hathaway. ‘Uncle Warren’ transformed this struggling textiles firm into a $693bn powerhouse today.
Buying Berkshire Hathaway ‘A’ shares is an expensive business, as their market price is currently $476,877 apiece. That’s around £390,410 each — a hefty amount to put into one company, no matter how well-run.
Instead, my wife bought Berkshire Hathaway ‘B’ shares, paying around £256.61 per share, including stamp duty and buying commission. As I write, the stock trades at $313.45, which is roughly £256.70.
So the Berkshire (and that’s Burkshire, not Barkshire) share price has hardly moved since we bought into Warren Buffett’s vehicle. But that’s largely due to breakage (buying expenses) and currency movements. In time, I expect this quality stock to continue enrich its shareholders, including my wife.
Here’s why I’m worried
But there are two dark clouds on the horizon for Berkshire Hathaway’s owners. Warren Buffett is 92 and will turn 93 in August. Though he is in great physical health and demonstrates unrivalled mental ability, he is nevertheless a nonagenarian. And while I hope for him to prosper well past 100 years of age, Buffett is a very senior CEO.
In addition, Buffett’s right-hand man — and investing legend in his own right — Charlie Munger is even more well-advanced in years. On New Year’s Day, Munger turned 99, so he’ll be a centenarian next year. Again, he may decide to step down soon, perhaps to focus more on family life.
Of course, I wish Warren Buffett and Charlie Munger many more happy years of corporate success. But when one, the other, or both step down from Berkshire Hathaway, I expect its shares to take a beating.
Then again, Buffett and Munger have taken great care to prepare Berkshire for their eventual departure. As part of their succession planning, they have closely mentored a host of excellent business and asset managers.
When the big day finally comes, this powerful collection of great businesses will be ably managed by Buffett lieutenants Greg Abel, Ajit Jain, Ted Weschler, and Todd Combs. Buffett says that this quartet is already running Berkshire day to day, so perhaps I should relax and stop worrying!
