Despite the fact that he draws much of his investment strategy from Ben Graham, Warren Buffett has some tricks up his sleeve. Being the world’s third richest person comes with a lot of perks that individuals off the streets just can’t mimic. Here’s why Joe 6-Pack shouldn’t expect to be reeling in billions like Buffett.
Buffett gets the first call
Individual investors are often limited to learning about companies via quarterly reports, investing newsletters and other publicly available knowledge. Rather than having to seek out expert sources and documents, Buffett has top investment bankers and dealmakers contacting him. Unless an investor is great friends with a pack of CEOs and analysts, they have a slim chance of finding the same opportunities. Berkshire Hathaway gets a jump on the average Joe.
Buffett gets deals other investors don't get.
Simply put, Warren Buffett gets better deals than any other investor in the world. Take his 2008 investment in Goldman Sachs, for example. Buffett invested $5 billion in preferred shares of Goldman, with an astonishing 10% annual dividend. Joe 6-Pack isn’t going to be offered Goldman paper with a 10% coupon. Ever.
Buffett can take bigger risks
With a market cap of $188.5 billion and $41 billion in cash, Berkshire Hathaway can afford to take risks and sustain losses in pursuit of high returns. Said Buffett in one annual letter to shareholders: “we have for some years been willing to assume more risk than any other insurer has knowingly taken on. Indeed, we have a major competitive advantage because of our tolerance for huge losses.”
Buffett buys private companies
Buffett has been known to buy into companies that are not listed on public exchanges, taking them over under the Berkshire Hathaway umbrella. Most investors don’t have the funds or the access to pull off that type of move on any sort of scale. In 2010, Berkshire Hathaway completed the acquisition of BNSF Railway in a deal valued at $34 billion, Buffett’s largest private purchase to date. 2010 was BNSF’s most profitable year ever, with almost $17 billion in revenue.
Buffett has help
Buffett has a team of investors working under him, helping do the legwork on his investments. Top minds like Ajit Jain (pictured here), who helped lead Berkshire Hathaway into the Indian market, and Todd Combs, a former hedge fund manager who joined Berkshire late last year, give Buffett an advisor network that the average Joe just can’t match.
Buffett doesn't need income
Joe 6-Pack wants to retire someday, and will likely need to draw down his savings throughout his golden years. Whereas most investors rely on decumulation throughout retirement, Warren Buffett has no need for such income. As a result, he can hold equities for as many decades as he wants, allowing him to really reap the benefits of slow-burning turnaround stories without worrying about income. Says Buffett, “Our favorite holding period is forever.”
Buffett has influence on companies
When Warren Buffett tells a company’s board how to position their business, it listens. Although he often likes to maintain a hands-off approach, Buffett isn’t afraid to offer his guidance to a company under his watch. Said Jain in 2002, ''Warren and I might have had a 30-second conversation or a 30-minute one, but he has been involved in every piece of business I have done."
Buffett had incredible timing
Warren Buffett has some fortuitous timing working in his favor. Not only was he lucky enough to be a student (and later colleague) of master investor Ben Graham, but he began investing in the aftermath of World War II. At the end of 1956, when Buffett started his own investment firm, the S&P 500 cost $46; now it’s $1339. That kind of timing can’t be taught.
Buffett has an army of followers
When Warren Buffett announces an investment in a company, thousands of followers piggyback on his picks, helping to prop up his investments. Most other investors don’t have the support network to move markets.
Last updated : 14 Sep 2019
I am 63 yrs old uncle living in HDB heartland who has achieved financial independence @ 56 and finally retired @ 60 from full-time job as employee on 1 Oct 2016.
Single household income since 1995 with three children.
Currently, two sons and one daughter are working.
I have been doing 20 years of long-term investing and short-term trading in Singapore stock market only since Jan 2000 so I am that so-called Panda or Koala in the investment world.
I am currently executing my Three Taps solution model to maintain sustainable retirement income for life till 2038.
Disclaimer: Stock trading involves significant risks. Create Wealth trader is not a licensed Investment Adviser and will not be responsible for any losses which you incurred. You are advised to always do your own homework before making any trading decision.