QTR’s Fringe Finance: The Sweet Sorrow of Warren Buffett’s Parting
Warren Buffett has been CEO of Berkshire Hathaway (BRK-B) for 55 years. At the company’s annual meeting, he announced that he would step down from that role at the end of the year, at the age of 95.
Buffett is best known as a value investor. And while that was true in his early years, his biggest success at Berkshire has been buying industry leaders. These are companies with strong advantages over their competitors.
Buffett has also benefited from U.S. monetary policy over the past five decades. The growth of the financial sector as a percentage of GDP boosted Buffett’s bank holdings. And holdings of credit card company American Express (AXP).
As Buffett’s reputation grew, so did the opportunities. Following the financial crisis in 2008, Buffett was able to ink sweetheart deals with major banks. Goldman Sachs (GS) paid Buffett a 10% rate on preferred shares, in a deal that was unavailable to others.
In short, Buffett’s acumen for great deals grew far beyond simple value investing. Today, Berkshire sits on a record-high cash hoard. Buffett was derided for being old fashioned and out of step with the markets at the start of the year. Following the bear market slide, investors are rethinking that view.
Future management may invest along a similar philosophy to Buffett. But it likely won’t carry the same premium and weight as Buffett’s.