Warren Buffet. 2004-11-06
The legendary investor, Ben Graham said that there are two requirements for success in investing: “One, you have to think correctly; and secondly, you have to think independently."
Today, the most famous pupil of Ben Graham’s is Warren Buffet. According to a columnist in Forbes magazine, it took only 15 stocks to make Warren Buffett the second-richest man in the world.
Forbes magazine did a study a few years back, which looked at all of Warren Buffett's investment decisions over the years. They concluded that there were 15 stocks that made Buffett rich beyond anyone's wildest dreams, turning him into a modern investment legend. Without those 15, stocks, Buffett's returns would have been mediocre.
Some of the household name stocks included the following: Coca-Cola, Gillette, GEICO, Washington Post, Wells Fargo and American Express.
Berkshire Hatherway (Buffet’s investment vehicle)owns 8.3% of Coke, 3.33% of Wells Fargo, 10% of Gillette, 12% of American Express and 100% of GEICO. Those are big stakes. When Buffett decided to get into those stocks, he bought as much as he could, knowing that he was planning to hold them indefinitely. Buffett has done that since the beginning of his investment career, no matter how much money he had.
How did Buffett find those 15 stocks that were worthy of big chunks of his investment capital?
He focused only on companies 1) whose businesses he understood, 2) with good management teams, 3) with a competitive advantage sufficient to produce high returns on capital for many years to come and 4) that were priced to make him rich.
That's what Buffett was looking for then and he still follows this investing principle today. Not many individuals have the time or resources to seek out these investment opportunities. Also, if you don't know what you're looking for, you're never going to find it.
This is where Pink Investments can help you.
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