Why Warren Buffett likes elephants and moats
Buffett jargon can help make you rich
FBN’s Liz Claman talks to billionaire Warren Buffett about Berkshire Hathaway’s massive cash pile.
Warren Buffett is the fourth-richest man in the world and you don't rise to that level without a few savvy moves.
With an estimated personal net worth of $90 billion, per Forbes, the down-to-earth investor has built his portfolio with household names and proven earners.
His Berkshire Hathaway was worth $231.6 billion as of this year. Among his biggest holdings: Apple, Coca-Cola, Bank of America, American Express and Wells Fargo.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| AAPL | APPLE INC. | 228.02 | +3.02 | +1.34% |
| KO | THE COCA-COLA CO. | 61.84 | +0.11 | +0.18% |
| BAC | BANK OF AMERICA CORP. | 46.72 | -0.03 | -0.06% |
| AXP | AMERICAN EXPRESS CO. | 285.54 | -1.33 | -0.46% |
| WFC | WELLS FARGO & CO. | 74.09 | -0.25 | -0.34% |
Earlier this month he assumed a new position in Kroger and has been steadily building positions in airlines, including Southwest and banks such as JPMorgan.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| LUV | SOUTHWEST AIRLINES CO. | 32.33 | -0.27 | -0.83% |
| JPM | JPMORGAN CHASE & CO. | 245.03 | -0.28 | -0.11% |
BUFFETT'S 5 BIGGEST STOCK HOLDINGS
While he doesn't divulge the precise way he and his team select investments, he has discussed over the years some of his top criteria which include two key characteristics, one of which is a moat.
MOATS:
Many average folks may think of a moat from the perspective of a king or a queen in a castle. A moat surrounds the castle and acts as a protector. A moat in the corporate world functions in a similar way. It means your business is likely the very best in its field and set far apart from weaker competitors and untouchable from a competitive stance.
"In business, I look for economic castles protected by unbreachable 'moats.'"
"In business, I look for economic castles protected by unbreachable 'moats,'" said Buffett in his 1995 letter to shareholders. At the time, he gave a shoutout to his insurance company GEICO for being that moat.
At the time, GEICO boasted 3.7 million auto insurance customers. Today, that figure has risen to more than 17 million, according to the company.
The Geico van at the Houston Air Show. The air show was held at the Ellington International Airport.
Fast-forward, Buffett's Berkshire has been on the hunt for a company that can mirror the success of a GEICO and is "elephant-sized."
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| BRK.B | BERKSHIRE HATHAWAY INC. | 472.20 | +1.92 | +0.41% |
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ELEPHANT-SIZED:
In last year's annual shareholder letter, Buffett expressed his desire to put his massive pile of cash to work, $128 billion as of last check, but he bemoaned that prices were a bit lofty at the time.
WARREN BUFFETT TOOK A PASS ON TIFFANY'S
"In the years ahead, we hope to move much of our excess liquidity into businesses that Berkshire will permanently own. The immediate prospects for that, however, are not good: Prices are sky-high for businesses possessing decent long-term prospects. That disappointing reality means that 2019 will likely see us again expanding our holdings of marketable equities," he said while also noting that he will continue his hunt.
"We continue, nevertheless, to hope for an elephant-sized acquisition. Even at our ages of 88 and 95 – I’m the young one – that prospect is what causes my heart and Charlie’s to beat faster. (Just writing about the possibility of a huge purchase has caused my pulse rate to soar.)"
"We continue, nevertheless, to hope for an elephant-sized acquisition. Even at our ages of 88 and 95 – I’m the young one – that prospect is what causes my heart and Charlie’s to beat faster. (Just writing about the possibility of a huge purchase has caused my pulse rate to soar.)," he said.
Buffett also noted of the cash pile he sets aside a cool $20 billion "to guard against external calamities."
Even still that leaves an estimated $100 billion-plus to make some deals.
Berkshire Hathaway CEO Warren Buffett and Vice Chair Charlie Munger tell FBN’s Liz Claman that Coca-Cola shouldn’t venture into the marijuana business.