In earlier days, I shunned capital-intensive businesses such as public utilities. The third criteria - high return and low capital expenditure requirements - can be found in Buffett’s 2009 shareholder letter on page 9: Small-cap stocks, which often are defined as those companies possessing a market capitalization (i.e., stock price per share times number of shares outstanding) of $2 billion or less.A portfolio size of $1 million or less and.Okay, so the first two criteria for earning 50% annual returns are: So Buffett has to forego the 50% growers and settle for capital-intensive slower growers that can absorb the investment capital he needs to throw at them. It’s not that Buffett can’t find great small-cap stocks, but that these stocks can’t absorb the large amount of capital that Berkshire needs to deploy in order to “ move the needle” on Berkshire’s overall performance. Most of the time, big sums are one hell of an anchor.” He made a similar comment about size a decade later in 2009: “With tiny sums to invest, it’s extraordinary what you can find. But you can’t compound $100 million or $1 billion at anything remotely like that rate. I think I could make you 50% a year on $1 million. It’s a huge structural advantage not to have a lot of money. The highest rates of return I’ve ever achieved were in the 1950s. If I had $10,000 to invest, I would focus on smaller companies because there would be a greater chance that something was overlooked in that arena. Back in 1999, Buffett was quoted as saying the following: The larger the pot of money to invest, the worse off investment returns will be. It’s not because he’s old it’s because the size of his portfolio is so huge.Īccording to Warren Buffett’s 2017 shareholder letter, Berkshire Hathaway’s (NYSE: BRK-A, BRK-B) investment portfolio of publicly held common stocks has a market value totaling more than $170 billion! Buffett bemoans the fact that he can no longer buy the high-growth, small-cap stocks that produced such stellar investment returns for Berkshire in its early years. You see, Buffett himself admits that, while he aims to beat the S&P 500 by several percentage points per year on average, he can’t outperform the market by as much as he used to. Small investors can beat Warren Buffett at investing and earn 50% annual returns based on Buffett’s own investment principles.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |