How To Invest Like Billionaire Warren Buffett
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Today we discuss how to invest like billionaire Warren Buffett. Warren Buffett is one of the richest people in the world with a net worth over 80 billion. I will tell you exactly what Warren Buffett looks for in picking stocks for the Warren Buffett stock market portfolio.
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Well, I have a treat for you guys here today. Today I’m going to go in depth on exactly how Warren Buffett invests his money into detail exactly what he looks for an investment, and how this guy just makes more and more money all the time.
We’re gonna go super in depth into this today, if you don’t already know, a warren buffett is one of the most successful investors ever in the history of the world. Okay, I would say arguably the most successful stock market investor ever Okay.
This guy’s worth somewhere around $80 billion right now. And this is after he’s already given away an inflation adjusted amount of around $50 billion in his lifetime. Think about that for a second.
This guy’s given away around $50 billion already. And he’s still worth 80 billion. That’s like ridiculous to even think about guys. So I’m gonna go super in depth into this video today.
We’re gonna look at everything that exactly how he picks an investment, what he does, what he doesn’t do, what he doesn’t get involved with and whatnot. Hope you guys really enjoy this.
By the way, make sure you follow me on Instagram. If you’re not already I post a ton of content on Instagram, especially on Instagram stories. So look forward to having you guys on there.
Alright, so let’s start this off with what Warren Buffett doesn’t really invest in. Okay. Warren Buffett. You know, despite his many billions of dollars, he doesn’t really invest in real estate, okay, which is you know, when you think of billionaires you think real estate you like you think oh, man, billionaire.
He’s got to own 510 15 properties mansions all over the world, different countries. Maybe they even own apartment complexes or condo complexes and things like that. And they get you know, bankrolls coming in from that.
Warren Buffett, despite being worth billions of dollars virtually owns no real estate The only thing he really is involved with real estate is his company. Berkshire Hathaway has a Home Services side of the their business which helps sell homes.
And he also owns Clayton Homes, which actually builds homes, okay, everything he knows two things. He’s almost kind of like not even in real estate. It’s unbelievable how little real estate this guy owns.
He owns a home in Omaha, Nebraska, which isn’t even a mansion. It’s like a decent home, right? He used to own a home out in California was a nice beach home. But he actually put that up for sale about a year ago or so.
So he probably doesn’t even own that property. Now, he owns a few farms, but it’s very, very little property this guy actually owns it’s almost incredible, okay, it’s almost incredible how little this gentleman owns, okay.
He doesn’t really invest his money and commodities, okay? He doesn’t invest his money in crypto or anything like that. Or let’s just say alternative investments. All right. This guy what he invests his money in what he wants is he wants income producing assets, okay, income producing assets.
What is an income producing asset? an income producing asset is anything that throws off money all the time, which is businesses, okay. Businesses, what ends up happening, you own a profitable business, that business brings in money, okay.
They bring in money pretty much consistently every single day. And that money can get thrown off to his company, which he owns a huge ownership stake in Okay, which is called Berkshire Hathaway. Okay.
Berkshire Hathaway. So he owns all these businesses, some businesses, he owns 100% outright, okay, he owns 100% of that businesses and others, he owns a percent of that business, okay, which is through stocks, all right.
He will buy stocks of ownership in a business, which when you buy a share of stock in a public company, you are becoming part owner of that company, okay, depending on how much you buy for is how much you own of that company. All right.
So that’s what he’s doing. He’s buying ownership stake. And usually when he buys stocks, he buys an ownership stake, generally in companies of between 5% and 10% of that company. All right.
He usually likes to keep it under 10%. I’ve noticed all right, but generally, it’s between 5% of that company owns in 10%. All right. So that come the companies that he owns 100% on, they make in all these profits, all right.
And he takes that money and it goes to Berkshire Hathaway, and then he goes and invests that in more businesses, all right, it’s a beautiful thing, right? These stocks, many of them are dividend payers, okay.
Many of them pay dividends in these dividends get paid out to his Berkshire Hathaway, his Berkshire Hathaway then goes buys more businesses or goes and buys more stocks and his his amounts of dividends he gets the amount of profits he gets from the businesses he’s owns.
100% of it just goes up, and it goes up, and it goes up. And then it goes up, and the profits just get bigger and bigger. And his net worth just goes up even despite you know how much money he’s giving away.
His network still continues to go up and up and up. It’s a beautiful, beautiful, beautiful thing, right? But how does he manage to make money so much, so many more times than he loses money in stocks? Right.
The amount of times Warren Buffett has lost money in stocks is like this much, you know, is a very few times that I can look at and be like Warren Buffett actually lost money because sometimes he’ll buy a position and even if that position went south.
He probably made more in the dividends than than what he lost on what those shares went down or didn’t do over that amount of time. The amount of times Warren Buffett makes money.
It’s ridiculous, guys, it’s ridiculous. So we’re going to talk about exactly what Warren Buffett looks for in a stock, and how he kind of thinks about building out his portfolio and whatnot.
That’s what we’ll get into next. But once again, all these other, you know, ways of investing. It’s just not something that interests him. He wants to own businesses, part of businesses, or the whole dang thing. Okay.
Either one works for him, that he wants those businesses to throw off profits to him, their income producing assets, he makes that money, he invested into more into more in a more in a more, and that is his strategy.
And that’s how he’s built an unbelievable amount of money. It’s just done that over time and time again. Okay. So stocks, how does he think about, you know, investing in stocks? What is he actually looking for when investing in stocks? All right.
Well, first, let’s talk about what he’s not looking for, okay. He’s not looking for a company that is highly risky. Okay, let’s, let’s put over over here, the knot category, he doesn’t want a company that is risky.
He does not want a company, that’s risky. If this company doesn’t have much competitive moat, or they’re in a risky field, he feels he doesn’t want that. Okay? If it’s not in his circle of competence.
His cc as we’ll call it, which is circle of competence. Basically, what that means is, it’s your fundamental understanding of what that company does, or whatever you’re investing in, what it actually means and what it does, and how that can make you money and whatnot.
That’s your circle of competence. I think this is a phenomenal thing. No one should ever invest in anything, I don’t care if it’s real estate, stocks, commodities, crypto, I don’t care what we’re talking about.
You should never ever invest in something, if it’s not in your circle of competence. You don’t fully understand everything about that company, or about that piece of real estate, or that crypto or whatever it is that commodity, man, you shouldn’t be investing.
It’s got to be in your circle of confidence, okay? He also doesn’t like anything that’s got a bad balance sheet, okay, a balance sheet, meaning, you know, what, that company has an assets versus liabilities of Warren Buffett’s very, very few mistakes.
I’ve seen him make over his investing career. I don’t ever remember him investing in a company that went bankrupt. And if he did, it was a long, long time ago. Okay. Not unlike modern history.
I don’t ever remember him investing in a company in it went bankrupt, okay, because they had a very poor balance sheet. All Warren Buffett companies generally have very strong balance sheets.
They generally have a ton of cash or investments on the balance sheet, they generally have very low debt, or if they do have debt, it’s manageable in the company is super profitable, he’s not going to buy companies that there’s no profits, okay.
If there are no profits coming in, he’s not buying it. Okay. He’s not buying companies that are non profitable. So many people buy these companies and they don’t make any profit. That that’s makes it a big risk man, you buy a company that doesn’t have do not make any money.
And that bottom line, you do, you’re taking a big risk there, he doesn’t mess with that man. So that’s what he’s not looking for. Okay, if it’s risky, if it’s not in his circle of competence as a bad balance sheet.
If it doesn’t make profit, he’s not looking for those type of things. All right. So now let’s get into exactly what he is looking for. All right. He’s generally looking for companies that have a market cap bigger than $10 billion.
All right, a market cap bigger than $10 billion. What a market cap is, is basically, it’s what the company’s total value is, okay. And how you can calculate market cap is you can take however many shares that company has outstanding.
And times that out by whatever the share price is, and you’re going to get what that market cap is, all right, this is a company’s valuation. He generally sticks to companies that only have a market cap over 10 billion, okay, 10.
We’ll just say, we’ll say here 10 billion plus, okay. 10 billion plus, it’s very rare I ever see Warren Buffett invest in a company that has a market cap under $10 billion, like it almost doesn’t happen.
A few reasons. One, this helps mitigate risk, you invest in companies at market cap over $10 billion. These are bigger, very well established companies, generally speaking, and the chances you’re going to.
I guess you say lose a massive amount of money. It’s a it’s a little more slim than if you’re investing in companies that maybe have market caps in the hundreds of millions, or maybe 1,000,000,002 billion $3 billion market caps, generally speaking.
So it’s generally speaking a little safer to invest in bigger type companies, all right. Also, he doesn’t really invest in too many smaller companies because he has so much money to invest when he’s looking to buy a stock.
And so to get a nice ownership position, he needs to invest in companies that had 10 billion plus dollar market caps on them. All right. So that’s a big thing. He also is looking for generally companies that pay dividends, okay.
He loves dividends, okay? dividends are his thing. He will mostly invest in stocks that pay dividends. If it doesn’t pay a dividend. He’s not very interested in that particular stock. All right. Here’s why.
Dividends also give another form of protection to the stock Okay, so when you buy a stock There are two ways to make money. One is shares Go up over time, the other as you get paid out money in the form of dividends, all right.
Whether we’re talking about special dividends or just regular quarterly dividends, which most big companies pay every three months. So gives you a lot of protection when you buy companies that pay out dividends, right.
Well, remember I told you just a minute ago, you know, his IBM steak, I think that was one of the very few mistakes in recent times he lost money on I know, Tesco was another one.
Those are the two those are the two only investments I can think of that kind of went bad form. On the IBM steak, I think he actually technically still made a good sum of money on that steak, just because a company paid him a lot of dividends while he held those shares.
Now if he invested the money in some of his other companies, we can say he could have made a lot more Yes. But I don’t think he technically we could look it up. I technically don’t think he lost money in IBM.
Because he made so much in dividends, okay, which is incredible to think about. This gives you some protection, something to think about there, guys. So he’s sticking to the companies that are bigger.
He’s sticking more to companies that pay a dividend. Alright. He’s also looking for companies that have a big competitive moat around them. Okay. Now, there’s a lot of talk recently about competitive moat.
Elan musk says you don’t there’s no such thing as a competitive moat. Warren Buffett’s a huge believer of competitive moat. What a competitive moat? What it basically means okay is imagine you’re you’re you live in this castle, okay.#
You live in this castle, it’s in between a piece of land, right? And you live on this piece of land, and there’s a castle there. And it’s like people could come invade you from all over the place, right? People who come to the mat, imagine it’s like the Middle Ages or whatever.
People will come and invade you. Well, if you got a nice, you know, big, big walls around your castle and whatnot, and you got water with alligators in between it, and you got bridges that come up.
So no one can can get over unless they actually go in the water. They build their own bridge trying to get into your castle. That’s a big competitive moat, right? That’s a moat around your castle.
This is the same strategy when you when you’re thinking about picking a stock, right? You want a company that can fend off companies coming against them? Because we know we’re talking about companies that have billion.
You know, many billion dollar valuations on them, okay? 10 billion, 100 billion dollar valuation, when you are making that kind of money, you got those type of valuations, like there’s gonna be a lot of people coming for you.
There’s gonna be a lot of people gunning for you, right? There’s a lot of people trying to come in that castle and get your money. So what you need is a strong competitive moat around that business.
Alright, so competitive moat, we could break that off on a few different things we can say brand, we can say brand, reputation, you know, brand rep, which basically, think about it a few different ways, brand reputation.
If you’re a consumer brand, how strong is that consumer brand? You got to think about some of the companies Warren Buffett owns, you know, Coca Cola, is about as strong as it were like, that’s a first investment I think about his one of his biggest investments is Coca Cola, right.
It doesn’t get any stronger of a brand reputation than Coca Cola, you don’t get and then you think about all the massive amount of brands, Coca Cola owns that people drink on an everyday basis, okay.
They have an unbelievable brand reputation. Maybe some of their products aren’t the most healthy, and whatever, we could talk about that. But in terms of people knowing it in massive amounts of people drinking on everyday basis.
The brand reputation is off the charts for something like Coca Cola can also think about it in a business to business environment. What is that company’s brand reputation with other businesses they do business with? Okay.
He’s looking for companies that have strong brand reputation. That’s a big thing for competitive moat. All right. Also, another big thing for competitive moat is balance sheet. This is something people don’t even think about the balance sheet, which once again, is assets versus liabilities, the balance sheet.
Here’s the thing with the balance sheet, guys, if you got a lot of money in cash, you got a lot of money in investments, you have a lot of assets out there, right? If the hard times come, you know another company might get it way worse than you another company might go bankrupt when times get rough.
Because any the industry went south, the economy went south, we know recessions happen, right? Some companies go under because they have weak balance sheets. If you have a great balance sheet.
You have another competitive moat around your castle, all right, because you can get through the bad times. You don’t have to fire all your employees and lay off all your employees because you can’t afford it.
No, you got cash on that balance sheet. You got money. All right. That’s a competitive mode advantage. Another thing is profits. Okay, profits, you know, that helps out with a competitive moat in a big way.
If you’re not making any money in your business, that’s a vulnerability. That’s a huge vulnerability if you’re not making any money, because that means you’re losing money, which means your your, your economic impact is less and less and less every single day, every single month.
Every single quarter if your business is consistently losing money, right? Think about it in this way. Let’s think about, let’s say you got $10 billion in cash on their balance sheet. You know, let’s think about this for a second.
You got $10 billion of cash. Well, if you’re losing, let’s say a billion dollars Every year, you’re taking a billion dollar loss every year. Next thing you know, you have 9 billion, you know, you take another billion dollar loss.
Next thing you know, you have 8 billion. Next thing you know, you’re gonna have eventually have no money left in your balance sheet or you’re gonna have to take out loans, then start paying interest on debt.
All right, and it’s just your competitive moats getting less and less and less, you’re loaded up on money and you’ve got big profits coming in. then guess what ends up happening, the your competitive moat widens, because your 10 billion.
You make an extra billion dollars in profit, you also have an $11 billion profit. All right, it’s a vulnerability if you don’t have profits. Alright, this is what we’re talking about what competitive moat.
And one last thing what competitive moat is we’ll talk about management, okay, management, a great management team knows how to fight off the competitors, a great management team knows how to fight off competitors.
So you always want to look and see like, what like one of the management teams out there? Like, like, what gives this management team a competitive advantage over this one over here? Like, what is this management team done in the past.
That’s going to give me confidence that they can execute on this plan in the future? It’s a big thing to think about there, guys. So that’s what we’re talking about with competitive moat.
These are the type of things he’s really looking for. All right, he wants big profits. He wants a great balance sheet wants a great management team, he wants great brand reputation. He wants dividends.
He wants market cap over 10 billion. All right, this is what we’re talking about. Okay. Now, here, here’s some, probably some of the biggest stuff I’m going to share with you now at this point, okay.
We’re gonna get into some of the most important stuff you could possibly talk about. Alright? So there are a few ways you can think about investing in stocks, you can think about it from the perspective of I want to go in I want to buy stocks.
Just because I like that stock or, you know, I think that stocks going to go up, let’s just put it that way. You can think about it that way. I think that stocks gonna go up. So I want to buy this stock, okay.
It’s not really how Warren Buffett thinks about buying stocks, okay, how Warren Buffett thinks about buying stocks, as he says, I’ve got a lot of money all the time, man, I got a lot of money all the time.
Here’s what I’m gonna do. I’m gonna wait for values, okay? When I feel like there’s a good value out there. I’m gonna go ahead and buy those shares, Okay, I’m gonna go and buy those shares.
When I feel there’s a good value out there. No one I’m desperate to buy shares, okay. Warren Buffett will stack money on that that balance sheet of Berkshire Hathaway, okay, he will he’s not a never.
He’s never in a position where he’s desperate to kind of go buy a company right? Now, he waits for his opportunities, because he’s got so much money pouring in, then he knows that money’s just gonna keep piling up.
Now money’s just gonna keep piling up. And I’m going to see a value which values always come because either Something happened in the stock market short term, everybody got freaked out, the stock market went down.
He sees a bunch of values out there. And he goes in buys those values. Okay, that type of stuff always happens every now and then stock market will actually legitimately crash which is very.
Very few and far between crash meaning 20 plus percent downward move those type of opportunities, you got a lot of cash, you’re ready to go, you’re gonna get a massive amount of values and massive amount of stocks, right.
It’s pretty much like you can’t miss when you when when the stock market crashes and you start investing. It’s almost like you can’t mess man and like, it’s hard to, you know, not make money in the stock market going long on shares after after stock crashes happen or something like that.
This is what he’s trying to do. He’s saying, I got money all the time, I got money pouring in from all my stocks, which he owns a massive list of companies. We’re talking about some of the biggest companies in the world.
Some of the biggest banks in the world, some of the most profitable businesses in the entire world. He’s got them paying out on dividends. He owns 100% ownership of a massive amount of companies that all his money coming in.
He’s not desperate. Okay? He’s not the D word. All right. You want to think about this. You never want to have the D word going on. You never want to be desperate to buy shares. All right.
And there’s so many stocks out there, there are 1000s 1000s of stocks to pick from okay. 1000s of stocks. Okay. 1000s of stocks that you could invest in. All right. Never be desperate to buy one. Okay.
Never be desperate to buy one because there’s so many opportunities out there. There’s so many opportunities out there. Like why get desperate to buy one stock? When there’s so many fish in the ocean.
There’s so many fish in the ocean, like why get desperate, he never treats it like he’s desperate to buy shares. Okay, so another big thing, Apple Apple is a had been a phenomenal position for him. You know.
I don’t know what their cost basis is on Apple. But based upon where they started buying it in the kind of like, where they’ve been buying that and whatnot. I would say the overall cost basis in Apple is probably somewhere around 125.
Right now they start buying it way cheaper than 125. But they’ve also bought a lot of shares above 125. Now at this point, that’s a great value he got on Apple, okay. And he waited on Apple until he fully understood the business and it was in his circle of competence.
He realized the competitive moat this businesses has. And then also, you know, what did Apple start doing? They started paying out dividends, okay. And he says, Wow, this company has a great competitive moat around it.
They pay out all these dividend money on when they get to build bigger and bigger stake and other companies in this company through all those dividends, this company is going to pay us out over the next 510 years.
The guys kind of hold her up there in Asia and whatnot, right? But he still thinks in a long term mindset. And he’s thinking, Well, you know, imagine the type of dividends, Apple’s oing to be able to pay out five years from now, 10 years from now.
15 years from now, it’s going to be pretty amazing how much they’re going to be able to increase that over time. Okay, so this is how he’s really thinking, he’s thinking, Man, I want a good value, then I’ll go buy, okay.
I’ll save up money intelligent, I’m ready to go buy, okay. And that’s a big thing like, never be desperate to buy shares, buy shares, when you feel the company is a good value. That’s it, if you feel a company’s overvalued.
Don’t necessarily buy. but on the same token, he says, sometimes it’s better to pay a fair value, he says, sometimes it’s better to pay a fair value for a company, then pay an undervalued valuation for a poor company.
Very important there, it’s sometimes better to pay a fair valuation, what you feel is a fair value. Rather than pay an under valued valuation for poor company or an a company. That’s just okay.
Okay, creme de la creme, that company, a company has a great management team, a great brand, a great competitive moat, that type of company, sometimes you got to pay a little bit more of a premium for those type of companies.
But sometimes it is very much worth it. Rather than finding the stock over here that it looks like it’s very undervalued, but they don’t have a very good management team, they don’t have very good competitive moat, you know.
It’s just a lesser of a company, sometimes it’s better to pay the creme de la creme, the top brand, okay, buy the top brand in that industry, rather than, you know, reach down and buy something that’s a lesser in this is something big guys, like by the, by the top brand.
And a lot of industries, if you want to buy a brand that you know, is like the third tier brand, their fourth tier brand, and there’s no real promise of them ever becoming the top dog. Sometimes it’s better to buy a top brand.
And you’re gonna feel a lot more comfortable about that investment. Okay, that’s a big thing I try to do whenever I’m like looking at any type of industry, I’m trying to buy like the creme de la creme of that particular industry.
I think is a really big thing. Rather than trying to say, well, there’s this number three player in the industry, their stocks a little bit cheaper on a valuation basis, then this other company, maybe I’ll buy the third tier.
But they’re not you really want to stick with the top dogs in their industry, whatever they competed, you really want to pick the top ones, okay, that’s a very, very big thing. And what he’ll do is he’ll build out a massive portfolio.
Okay, and let’s talk about how he builds out his portfolio now at this point in time, okay? Because he doesn’t just, he doesn’t just, you know, load up on one industry or something like that.
He doesn’t just, you know, see what industry they’re in just all let me just load up the put all my marbles in this one basket here. No, no, no, that we’ll call it the Warren Buffett portfolio. Okay, Warren Buffett portfolio.
So it’s here in the middle. So what he’ll do is he’ll buy a ton of different, you know, companies from different industries. So, you know, we can think about Coca Cola, we can call that, you know.
I guess a drink company, we’ll just call it a drink company. Then he owns a massive amount of shares in Bank of America, Wells Fargo, some of the bigger banks out there, Goldman Sachs.
So he owns a ton of banking names. So he owns a train company, he owns a bank company, he Apple is now around their biggest position in Berkshire Hathaway now at this point, okay, so he owns an electronics company, right? We call it I mean.
Apple is almost more of a, I would almost call Apple more of a consumer products company, they’re almost more in tune to be in like a Kimberly Clark or a Procter and Gamble, or Johnson and Johnson or something like the almost like a business that’s so reoccurring now that services is in whatnot, and people just.
You know, they’re on their iPhone breaks, they go buy another iPhone, their iPad breaks, they go buy another iPad, their Mac breaks, they go buy another Mac, it’s almost like a needs based business.
And now Well then, you know, a one one off type type business like we think about with most electronics companies. So he adds that there Okay, then he goes and adds some business to business.
Okay, we’ll say some b2b type company, some some companies that, you know, do business with other businesses, he’ll add some retail names here and there, although he’s not nearly as big on retail nowadays.
As he used to be back before you know, Amazon started to take over the world and whatnot, then it’ll say I want to own an energy name. Okay. I want to own an energy name of some kind.
So he owns a ton of different energy companies, you know, some of the biggest in the world. He owns part ownership of many of those, okay? He’ll say I want to own in airlines, airlines aren’t going out of business anytime soon.
I want to own airlines, and I want to own credit agencies. He’ll just go industry by industry, and as long as the industry he understands he’s going to buy shares in it, guys. It’s a beautiful thing.
And this is literally how Warren Buffett invest exactly what he looks for in stocks and whatnot, exactly what he doesn’t like and the company or investments in general. I hope you guys really learned a lot from this video here today.
Let me know if you enjoy hit that thumbs up button if you got a lot of value out of this out. Hope you guys really did. By the way, make sure you follow me on Instagram if you’re not already like I said I post a ton of content on there, especially on the Instagram stories. I’m on there all the time. Thank you for watching. Have a great day.