The legendary investor and Berkshire Hathaway CEO, Warren Buffett, is known worldwide for his investment success. Buffett based his wealth compounding techniques on Benjamin Graham's philosophy of value investing, which determines a company's growth potential on intrinsic value, rather than its speculative price.
I’ve personally stuck with this investment philosophy with our Wealth Stocks portfolio.
Buffett's approach to value investing slightly differs from his mentor's. Graham would often seek intrinsically-undervalued opportunities, while Buffett seeks well-established opportunities with the underlying intrinsic value and potential to grow.
Like his mentor, Buffett's techniques for investing are simple and logical, but they require great levels of discipline and patience.
Due to his success and popularity, many have dubbed this way of investing as 'The Buffett Way' or 'Buffettology'. Another key insight Buffett famously revealed is that he never invests in something he does not or cannot comprehend.
Not being able to understand your investments would defeat the purpose of being a value investor because to know an investment's intrinsic worth requires an in-depth understanding of the industry and business.
Dividends have made up more than 45% of historical total stock market returns.
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Follow in the footsteps of investment legends.
Despite an impressive record of accomplishments that many modern investors attempt to imitate, the weaknesses in the Buffett strategy must be highlighted.
This is why Wealth Research Group is also diversifying into Artificial Intelligence – Buffett himself admitted missing out on Google, Amazon and others, due to his laziness to carefully study them.
Buffett has let valuable opportunities that produced percentages in the thousands (such as Google and Bitcoin) slip through the net.
Top Five Biggest Positions
Below, we will look at Buffett's top five holdings and each company's performance over the recent decades.
This company shaped a generation and is one of the few technology companies Buffett took action on. With the popular iPhone, iPad, and Apple computers rivalling Microsoft, the innovative company is the perfect candidate for the Buffett strategy: it's big, established, and pays out the largest dividend in the world.
It’s also too expensive for our purposes, right now.
Buffett revealed that Berkshire Hathaway now owns over 165 million shares of Apple, with an eye-watering $700 million in annual dividend earnings!
Wells Fargo & Company
Wells Fargo was originally the largest holding in Buffett's portfolio, but it is now second to Apple. Buffett began accumulating his position from the late eighties and did not look back. His stake in the company's shares is estimated to be worth over $27 billion.
Buying and holding has proven to work, with the economic crash of 2008 giving an excellent opportunity for the current economic cycle.
One of the most iconic brands on Earth, Coca-Cola is one of the elite Dividend Kings companies, and it boasts a stable and increasing dividend yield, making this an expected hold in the Buffett portfolio.
With a holding of 400 million shares and an estimated worth of $18 billion, this is the third-largest holding in the portfolio.
Kraft Heinz Company
Another big household brand, Heinz and Kraft merged together, resulting in Buffett owning around 325 million shares and making this one of his larger holdings. The popular Heinz ketchup product has dominated its respective industry and remained steady in its growth and evolution in the retail markets.
Bank of America
This is Buffett's largest financial holding after Wells Fargo, making up 10% of his portfolio at a value of $20 billion, with 679 million shares in his possession.
Other companies in Buffett's portfolio include: Walmart and American Express.
By looking at just the top five, we can see a trend and begin to spot similarities in Buffett's portfolio choices.
Each company is fully matured, pays a dividend, and has mostly experienced steady growth over the long-term.
Another key insight noticed is the fair distribution of investments in this portfolio, each comprised of around 10% of the total value and from a wide variety of industries, reducing risk and exposure to any market volatility.
Dividend Compounding requires enormous patience and discipline!
Reinvesting dividends for the long-term takes 20 – 30 years.
Successful investing marries long-term safety with short term small-cap expertise for mega-gains!
We publish in-depth research on small-cap opportunities. 100%, 200%, 500%, and 1,000% are possible.