Warren Buffett’s Net Worth by Age

Warren Buffett hasn’t always been one of the richest men in the world. Warren Buffett didn’t even become a billionaire until he was 50 years old. In fact, 99% of Warren Buffett’s net worth was earned after his 50th birthday.

Warren Buffett always had big ambitions. His goal as a kid was to become a millionaire by the time he was 30. And he did it.

Here’s a look at Warren Buffett’s net worth over the years:

Track stock picks and portfolio of Berkshire Hathaway, the holding company of Warren Buffett, to see which stocks he currently invests in: Warren Buffet Portfolio Tracker

Warren Buffett’s 20s: The First $100,000

After graduating from college, Buffett worked for his father’s brokerage firm as a stockbroker. When Buffett was 21, his net worth was shy of $20,000, reports Dividend.com.

At age 24, Buffett was offered a job by his mentor, Benjamin Graham, with an annual salary of $12,000. According to U.S. Census Bureau data, this was already about three times the annual median income for the average family in 1954 — proof that Buffett was well on his way to fortune. By the time Buffett reached 26, his net worth was $140,000.

Warren Buffett’s 30s: Millionaire Status

By age 35, according to Dividend, Buffett’s partnerships had grown to $26 million. Buffett bought controlling stock in Berkshire Hathaway in 1965, according to CNN, and by 1968 his partnerships grew to $104 million. Going into his forties at age 39, Buffett’s net worth was listed at $25 million.

Warren Buffett’s 40s: Bounces Back From Financial Troubles

By age 43, Buffett’s personal net worth was at a high of $34 million. He used some of this capital to purchase See’s Candies for $25 million, reports The Motley Fool, and it became an investment that’s still profitable in 2015. But, the mid-1970s proved to be a rough period for Berkshire. By 1974, its decreasing share price lowered Buffett’s net worth to $19 million when he reached 44, reports Dividend.

Never one to let his savvy investment skills fall by the wayside, Buffett was able to recover financially. By the end of the decade, he had increased his net worth to $67 million at age 47. By the close of the 1970s, the median U.S. household income was $16,530.

Warren Buffett’s 50s: Becoming a Billionaire

Buffett’s net worth in 1982 was $376 million and increased to $620 million in 1983, according to Dividend. In 1986, at 56 years old, Buffett became a billionaire — all while earning a humble $50,000 salary from Berkshire Hathaway.

Meanwhile, the average American family in 1986 was making nearly half of what the Oracle of Omaha was earning in salary; the median household income in 1986 was $24,900. As Buffett neared 60 years old, he was worth $3.8 billion.

Warren Buffett’s 60s: Berkshire Stock and Warren Buffett’s Net Worth Grow

In a letter to Berkshire Hathaway shareholders in 1990, Buffett wrote that he thought the company’s net worth would decrease during this decade, and the second half of 1990 supported that. But late in the year, the company was able to close with a net worth of up to $362 million. As he entered further into his sixties, Buffet’s personal net worth grew as well — to $16.5 billion by the time he was 66 years old, states Dividend.

The average American family began to creep up to Buffett in earning power during the 1990s. According to Census data, the median household income by the end of the decade was close to $42,000.

Warren Buffett’s 70s: Philanthropy and Growth

Within six years — from age 66 to 72 — Buffett’s net worth more than doubled. His net worth at 72 years old was listed at a whopping $35.7 billion. But, Buffett is about sharing the wealth. In 2006, he released pledge letters that stated he will donate 85 percent of his wealth to five foundations over time, reports CNN.

The median household income in 2000 was $42,148.

Warren Buffett’s 80s and 90s: The Sky’s the Limit

As of February 2024, Buffett’s net worth is $126.3 billion, making him the sixth-richest man in the world (he was #2 in 2015). At 93, Buffett shows no signs of stopping anytime soon. And while he might have an 11-figure fortune, Buffett reportedly earns only $100,000 a year at Berkshire Hathaway and spends it frugally.

Still, the master investor is making more than the average American. According to the most recent Census Bureau data, the median household income in the U.S. in 2021 was $79,900.

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Cathie Wood Portfolio Value (2016- 2023)

The dollar value of shares in the ARK Invest portfolio on the reporting date (in thousands).

Cathie Wood Portfolio Tracker: Track stock picks and portfolio changes of the famous investor.

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In this post, we’ll explore the different ways you can invest in water and look at options ranging from purchasing water rights to investing in water utilities and infrastructure.

Whether you’re a seasoned investor or just starting, this guide will provide you with valuable insights into the world of water investment.

So how can someone invest in water? Should you just buy a rain bucket? Before we get into the interesting stuff, let’s talk about why you might want to invest in water in the first place anyways.

Why Invest in Water?

Depending on where you live, you might take fresh, clean water for granted. I know that I normally do.

We often spout off the fact that 70% of the Earth’s surface is covered in water – something we probably all learned in kindergarten. While this is true, freshwater – the kind we care about – actually only represents 2.5% of that amount.

On top of that, only 1% of our freshwater is easily accessible, with most of the other 99% trapped in glaciers and snowfields. In the end, only 0.007% of the planet’s water is actually available to fuel and feed the world’s 7 billion people.

According to the U.N., water use has grown at over twice the rate of the world’s population increase in the last century. Today, we use about 30% of the world’s total accessible renewal supply of water. In less than 10 years, that percentage could reach 70%. By 2025, an estimated 1.8 billion people will live in areas plagued by water scarcity, with 2/3rds of the world’s population living in water-stressed regions.

Making matters worse, the water infrastructure in most developed countries is aging… and we haven’t taken any steps to upgrade it yet. The American Society of Civil Engineers (ASCE) predicts that at current rates there will be an $84.4 billion gap by 2020 between what we’re spending on water infrastructure and what is needed. Without upgrades, the U.S. is facing a loss of $416 billion in GDP.

Still don’t think access to freshwater is an issue?

• Just ask anyone who lives in California, which is in a state of continual droughts and wildfires.
• Or ask anyone who’s witnessed one of the 195 conflicts since 2000 that have been caused by water.
• Or ask the residents of Flint, Michigan, who are experiencing firsthand the effects of America’s aging water infrastructure.

Clearly there’s a growing and critical demand for access to freshwater and for related products and services. So how can an intelligent investor profit from it?

How Do You Invest in Water?

Option #1: Purchasing Water Rights

A water right gives the owner the right to use water from a water source (e.g., a river, stream, pond, or source of groundwater).

An investor who buys a water right can make money by selling (or in some states renting out) the water right for a higher price than was originally paid. Buyers might be municipalities, farmers, or corporations.

Obviously, prices depend on the demand for the water, which itself is a function of the need for water and the water’s use. For example, hydraulic fracturing generates massive demand for water as the development of an oil well requires 3-5 million gallons of water, and 80% of that water can’t be reused. Fracking companies, therefore, pay as much as $3,000 per acre-foot for water rights – compared to only $50 per acre-foot paid by farmers.

Setting aside the moral implications that might arise from choosing to sell water solely to the highest priced bidder, the economics of making money from water rights faces other issues as well.

The main issue is that it’s a perfect example of “greater fool theory.” The water right itself doesn’t provide any value. Consequently, the only way to make money from water rights is to find someone willing to pay a higher price for it than you did. Sometimes this might work out. Sometimes it won’t.

In any case, the barriers to entry here mean buying water rights just doesn’t make sense for the average investor.

Option #2: Invest in Water-Rich Farmland

2,000 years ago the ancient Romans built aqueducts to transport water from higher elevations to lower elevations. Aqueducts – combined with pipelines and pumping systems – are still used today in some geographies, including California, Australia, and Libya.

However, transporting water is not an easy feat – nor does it entirely solve problems without creating new ones. Here are some of the issues:

1. The actual construction of a pipeline is extremely expensive, often costing billions of dollars
2. Maintenance expenses to keep the pipelines going are also incredibly high.
3. Just like any oil pipeline, the construction of a water pipeline can disrupt ecosystems, ruin scenery, and create obstructions.
4. Most importantly, water pipelines – by their nature – are designed to divert water from a specific source. This can have serious ripple effects, affecting coastlines, aquatic life, plant life, and economic activity.

This brings us to the crux of Dr. Michael Burry’s latest “water trade” and why we’re talking about farmland. In a December 2015 interview with NY Magazine, Burry had this to say about water:

Transporting water is impractical for both political and physical reasons, so buying up water rights did not make a lot of sense to me… What became clear to me is that food is the way to invest in water. That is, grow food in water-rich areas and transport it for sale in water-poor areas.

This is the method for redistributing water that is least contentious, and ultimately it can be profitable, which will ensure that this redistribution is sustainable. A bottle of wine takes over 400 bottles of water to produce — the water embedded in food is what I found interesting.

 

In another interview with Bloomberg in 2010, Dr. Michael Burry said “I believe that agriculture land – productive agricultural land with water on site – will be valuable in the future.”

Certainly compared to water rights and water pipelines, growing food in water-rich areas and selling it in water-poor areas is the least contentious and most sustainable method for water distribution.

How can we capitalize on this?

Michael Burry is incredibly media-shy, but according to my research he’s been buying up almond farms. Why? Growing almonds takes a ridiculous amount of water – 1 gallon per almond. Paradoxically, 80% of the world’s almond supply is grown in California, which is going through one of the worst droughts in the state’s history.

Now, farmers can fallow most crops if there is a drought and just start over the next year. But you can’t fallow an almond orchard. An almond tree takes 3 years to mature and produces for 18-20 years. Without water, the tree dies and the farmer loses an enormous long-term investment. Because surface water has been rationed in California, farmers are drilling deeper and deeper for groundwater just to keep their almond orchards alive.

Michael Burry’s thesis is pretty clear now. With the demand for almonds continuing to grow, the farmland with the best access to onsite water is the one that is going to win out in the end, gaining share as competing almond farmers run out of water and are forced out of the marketplace.

Just like water rights, the barriers to pursuing this investment strategy are also high. The investments would have to be made on a very localized, regional basis, and would require fairly significant amounts of capital. Again, not a great strategy for the average investor.

Option #3: Invest in Water Utilities, Infrastructure, and Equipment

The recent crisis in Flint, Michigan – where lead from the city’s aging pipe system leached into the water supply – has drawn national attention to the nation’s aging water infrastructure.

By some estimates, more than $1 trillion in upgrades over the next 25 years are needed for the vast system of mostly underground pipes in the U.S., and experts are saying concerns over the aging infrastructure can no longer be ignored. In fact, the ASCE (the American Society of Civil Engineers) believes that most of our drinking water infrastructure is nearing the end of its useful life and gave the country’s drinking water and sewage infrastructure a “D” grade.

Without upgrades, the U.S. is facing a loss of $416 billion in GDP due to increased costs to households, loss of worker productivity, increased wasting of water… and more disastrous events like Flint, Michigan.

What kind of investments does the country need? New and improved treatment plants, expanded pipes, and better waste-water networks. The ASCE recommends financing these projects through government-backed revolving loans, tax-free private bonds, and the establishment of a federal water infrastructure trust fund and a Water Infrastructure Finance Innovations Authority with the ability to borrow from the federal government.

Additionally, bills are in process in various state capitals that could open the door to the privatization of water utilities in an effort to improve the quality and operations of poorly managed public water systems (like the one in Flint).

One way to benefit from these coming changes is to invest in the stocks of individual water utility companies. The water utility space is highly fragmented, and further privatization could lead to a roll-up play by larger companies, as well as free up access to the capital markets for infrastructure development.

The implementation of this strategy is already partly underway. American Water Works Company (NYSE: AWK), the largest publicly traded water and waste service provider in the U.S., closes approximately 15 acquisitions every year, and the second largest utility, Aqua America (NYSE: WTR), has made 300 acquisitions over the past two decades.

Other plays include investments in companies that actually build water infrastructure and equipment, such as:

• Calgon Carbon (CCC): A manufacturer of products that remove contaminants and odors from liquids and gases, both for industrial, municipal, and consumer markets.
• Mueller Water Products (MWA): One of the largest manufacturers and distributors of fire hydrants, pipe fittings and valves in North America.
• Xylem (XYL): A manufacturer of pumps, valves and analytic equipment used to move, test, and treat water in more than 150 countries.

There are a ton of different individual water companies to research, and a lot to learn about how the industry works.

You don’t have to worry if you’re overwhelmed by the amount of different water stocks out there though. That’s why god created index funds.

Invesco S&P Global Water Index ETF

By now, everyone should be aware of the advantages of investing in a passive index fund – namely diversification at a very low cost.

The Invesco S&P Global Water Index ETF (NYSE: CGW) is one of the best ETF’s to invest in if you want exposure to water-related companies. CGW tracks the S&P Global Water Index and, at an expense ratio of only 0.62%, is one of the cheapest on the market.

The S&P Global Water Index itself tracks 50 companies from around the world that are involved in water related businesses.

The Invesco S&P Global Water Index ETF tracks the S&P Global Water Index with a correlation of 0.95 or better (1.00 would represent perfect correlation).

Invesco S&P Global Water Index ETF Constituents

The S&P Global Water Index (and by extension the Invesco S&P Global Water Index ETF) is comprised of approximately 50 water stocks selected based on the relative importance of the global water industry within the company’s business model. The Index is designed to have a balanced representation from different segments of the water industry consisting of the following two clusters:

• 25 Water Utilities and Infrastructure companies: water supply, water utilities, waste water treatment, water, sewer and pipeline construction, water purification, water well drilling, water testing.
• 25 Water Equipment and Materials companies: water treatment chemicals, water treatment appliances, pumps and pumping equipment, fluid power pumps and motors, plumbing equipment, plumbing pipes, fluid meters and counting devices.

To ensure investability, a developed market listing and a minimum total market capitalization and float-adjusted market capitalization of at least $250 million and $100 million, respectively, is required. The Index is rebalanced semi-annually. No single stock may have a weight of more than 10% in the Index at each rebalancing.

Invesco S&P Global Water Index ETF Allocation and Performance

The Backstory on The Big Short

One of the eight films that was nominated to win the Oscar for Best Picture at the 88th Academy Awards in 2016 was The Big Short.

The movie, based on Michael Lewis’s book The Big Short: Inside the Doomsday Machine, tells the story of four investors who predicted the credit and housing bubble collapse in 2008 and decided to bet against Wall Street, earning billions of dollars in the process.

The first of these investors that predicted the housing bubble was Dr. Michael Burry, who is portrayed in The Big Short by Christian Bale.

While the movie does a great job explaining how Michael Burry was able to make nearly $1 billion betting against the housing market in 2008, it left many viewers very puzzled about a completely different issue – the last line of the movie, printed on a placard, is:

Michael Burry is focusing all of his trading on one commodity: Water.

This is a perplexing statement because unlike other commodities like oil, cotton, or silver, there is no market to trade water.

Summary

So is the Invesco S&P Global Water Index ETF the right investment for you? I’m afraid I can’t answer that question – only you can decide.

But if you believe in the thesis that water and water-related businesses are going to play more and more of a critical role in the future of this world, then the Invesco S&P Global Water Index ETF could be one investment that you might want to dive right into.

The Big Short: Inside the Doomsday Machine

BY MICHAEL LEWIS

The #1 New York Times bestseller: a brilliant account―character-rich and darkly humorous―of how the U.S. economy was driven over the cliff. Michael Lewis proves yet again that he is the finest and funniest chronicler of our times.

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The Big Short (2015)

BLU-RAY, DVD, AND STREAMING
STARRING: CHRISTIAN BALE, STEVEN CARELL, RYAN GOSLING, & BRAD PITT

Based on the true story of four outsiders who saw what the big banks, media and government refused to: the global collapse of the economy. A bold investment leads them into the dark underbelly of banking, where everyone and everything is in question.

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Michael Burry is a doctor turned investor who became famous for predicting (and profiting from) the 2008 financial crisis, a story recorded in the book and movie “The Big Short”. Burry also earned substantial profits on short-selling during the 2001 market crash.

Burry’s style revolves around identifying market bubbles and shorting the assets most likely to fall when the bubble bursts. In 2001 he was shorting major tech stocks, in 2008 he shorted the mortgage bond market.

Who Is Michael Burry?

When looking at Burry’s background, I was surprised to discover that finance is not his first trade. He started as a pathologist and studied investing as a hobby.

The more I learn about great investors, the more I see a pattern of a background in another field.

To this day, Burry holds an active physician’s license, meaning he stays up to date on medical progress, even if this is not of direct practical use in his investing career.

While working as a doctor, the quality of his stock picks on early Internet message boards caught the attention of large investment firms, including already famous investors such as Joel Greenblatt. This helped him launch his first hedge fund.

Burry became famous for shorting the housing bubble of 2008, but he actually made it big for the first time by shorting Internet stocks in 2001. He managed a return of 55% while the S&P500 was going down 11%. His returns in the two subsequent years were 26% and 29%.

On the personal side, Burry is married with children and is a fan of heavy metal music. Considering his own firm, Scion Asset Management, is named after a fantasy novel, I can guess he is also a fan of SF and fantasy.

Scion has a very limited client base – only four clients – and total assets under management of just under $238 million as of Q3 2023.

Michael Burry’s Investing Strategy

Burry describes his investing method as classic value investing, taking inspiration from Benjamin Graham, Warren Buffett’s mentor.

I would say that in practice he has his own style, focused on identifying and exploiting bubbles. Maybe this is because he achieved initial success during the dot-com bubble. Since then he has successfully bet on the collapse of the dot com bubble and on the end of the 2008 housing bubble. He is back on the hunt now (but more on that below).

Not all of his short positions work out. Notably, he gave up a short position on Tesla in 2021 after the company’s stock went up 100%.

Burry claims to have a focus on the margin of safety, but his short-centered strategy makes me think his definition of margin of safety differs significantly from Graham’s.

He seems to buy only companies that are somewhat undervalued or at the bottom of a cyclical downturn. That is similar to Graham, but I doubt that aggressive hedging and shorting would have matched the tastes of the grandfather of value investing. So like Buffett, Burry seems to have used Graham’s teaching as a base but adapted it into his own unique investing style.

Opinions on Current Markets

Michael Burry has accurately predicted two major market crashes and made a great deal of money in the process. He isn’t always right: Burry is sometimes criticized for having predicted “12 out of the last 3 recessions”.

One of Burry’s biggest misses came in 2023, when he predicted a serious recession and bear market, and took out $1.6 billion in put options against ETFs tracking the S&P 500 and the Nasdaq 100. Those positions could have produced massive gains in a market crash, but markets didn’t crash. The S&P 500 gained 24% and the Nasdaq 100 rose 54%. Burry was forced to unwind both positions at a loss, though holding options rather than outright short positions may have enabled him to cut his losses.

Burry has also apparently closed out a $47 million put option on the iShares Semiconductor ETF, presumably also at a loss.

Burry may still be right: a recession may be imminent. His losses on these positions underscore a fundamental reality of short positions, though: it’s not just a bet that the asset will fall, it’s a bet on when it will fall. Get the timing wrong and you can still lose.

Stock Picks

Burry’s portfolio is typically fairly concentrated, with fewer holdings than many major investors would have. As of Q3 2023 he was holding 11 stocks.

This is – for the most part – a conservative and rather defensive selection that reflects Burry’s economic expectations and his self-declared identity as a value investor. The exception, of course, is the $4.6 million bet on Alibaba, a company that most of us would not expect to see in a conservative value-oriented portfolio.

It’s interesting to note the divergence in size between the portfolio above and the put options that Burry recently unwound, which totaled nearly $2 billion and would necessarily have involved substantial leverage, as the positions greatly exceeded Scion’s total assets.

Burry’s style seems to focus on detecting and exploiting short opportunities, using options to reduce his risk, and keeping a relatively conservative core portfolio… with occasional exceptions.

Michael Burry is a difficult investor to emulate: large-scale shorting is not a strategy most investors would be well advised to adopt. He’s still worth following, thanks to his remarkable track record, brutal honesty, and complete freedom of speech. You may not always like what he has to say and you may not always agree, but it’s always worth considering.

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In Warren Buffett’s biography The Snowball: Warren Buffett and the Business of Life, Buffett explains how Charlie Munger became successful long before the duo ever even met each other. Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, ‘Who’s my most valuable client?’He decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day.

Jonathan Ping from My Money Blog elaborates:

Now, I’m sure just being a successful lawyer would be plenty for many people. But if you aren’t satisfied with your current situation, why not work for yourself an hour each day? Instead of just idle dreaming, set aside specific time for action. Perhaps the key is small chunks of time, but at regular intervals.

Example: If you’re an administrative assistant making $10 an hour and you don’t want to be, don’t just sign up to work another hour for $10. Working longer is not necessarily the best idea. Instead, give up the $10 (or $8 after taxes), and improve yourself in some way or create something so you’ll be making a lot more. There is no one solution, look into yourself. Nursing school? Investment books? Finding a mentor?

Shane Parrish of Farnam Street points out the importance of sacrificing short-term comforts for your long-term goals during this time:

It’s important to think about the opportunity cost of this hour. On one hand you can check Twitter, read some online news, and reply to a few emails while pretending to finish the memo that is supposed to be the focus of your attention. On the other hand, you can dedicate the time to improving yourself. In the short term, you’re better off with the dopamine laced rush of email and Twitter while multitasking. In the long term, the investment in learning something new and improving yourself goes further.

As Munger explains, I have always wanted to improve what I do, even if it reduces my income in any given year. And I always set aside time so I can play my own self-amusement and improvement game.

Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger

EDITED BY PETER KAUFMAN

Poor Charlie’s Almanack contains the wit and wisdom of Charlie Munger: his talks, lectures and public commentary. And, it has been written and compiled with both Charlie Munger and Warren Buffett’s encouragement and cooperation. So pull up your favorite reading chair and enjoy the unique humor, wit and insight that Charlie Munger brings to the world of business, investing and life itself.

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The Tao of Charlie Munger

COMPILED BY DAVID CLARK

Words of wisdom from Charlie Munger—Warren Buffett’s longtime business partner and the visionary Vice Chairman of Berkshire Hathaway—collected and interpreted with an eye towards investing by David Clark, coauthor of the bestselling Buffettology series.

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The Ultimate Guide to Value Investing

Do you want to know how to invest like the value investing legend Warren Buffett? All you need is money to invest, a little patience—and this book. Learn more

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In the 2015 film adaptation, Christian Bale, who played Michael Burry, captured the investor’s personality perfectly. This personality portrayal is considered by many a key to why both the book and the movie are so good.

While the film focused on the housing crisis and Burry’s bet against Wall Street, Burry was actually a phenomenal investor even before that. The story of how exactly Dr. Michael Burry started investing is as interesting as the film The Big Short.

I recently stumbled across one of the original articles that Michael Burry wrote in 2000 for MSN Money.

In the article, Dr. Michael Burry describes his investment philosophy and exactly how he went about picking stocks. Basically, Burry is a big-time value investor and follows many of Ben Graham’s and Warren Buffett’s strategies, including:

• Invest with a margin of safety
• Perform bottoms-up, fundamental analysis
• Look for great stocks in disfavored industries
• Portfolio management is as important as picking stocks

Margin of Safety

Dr. Michael Burry is a true Graham-and-Dodd style value investor. According to Burry:

I really had no choice in this matter, for when I first happened upon the writings of Benjamin Graham, I felt as if I was born to play the role of value investor.

Burry believes that it’s critical to understand a company’s value before laying down a dime. His main goal is to protect his downside so that he can prevent a permanent loss of capital. Consequently, all of Burry’s stock-picking is 100% based on the concept of margin of safety (see my article: What is Margin of Safety?).

Michael Burry says that if you focus on intrinsic value and invest with a margin of safety, then you don’t have to worry about specific, known catalysts (an event which causes investors to finally recognize a stock’s true intrinsic value and causes the stock’s price to “pop”) before you make an investment. According to Burry, “sheer, outrageous value is enough.”

Bottoms-Up, Fundamental Research

Michael Burry says that his “weapon of choice as a stock picker is research.” Burry doesn’t care about the level of the stock market, and he has no restriction on potential investments: they can be large-cap stocks, small-cap, mid-cap, micro-cap, tech, or non-tech. It doesn’t matter – as long as Burry can find value in it, it becomes a candidate for the portfolio. That being said, Burry says he’s found that out-of-favor industries provide great opportunities to buy shares of best-of-breed companies at steep discounts.

So how does Burry find value investing opportunities?

He uses stock screeners to screen through large numbers of companies by looking at the EV/EBITDA ratio (acceptable ratios for Burry vary with the industry and its current position in the economic cycle).

If a stock passes his loose screen, Burry then looks harder to determine a more specific price and value for the company. This involves looking at true free cash flow and taking into account off-balance sheet items.

Burry tends to ignore price-earnings ratios and thinks that return on equity is both deceptive and dangerous. Burry prefers minimal debt.

“Rare Birds”

Michael Burry also invests in what he calls “rare birds.” These are mostly asset plays, but also include arbitrage opportunities and companies selling at less than two-thirds of net value (net working capital less liabilities; i.e. Ben Graham’s net-net stocks, or companies that are selling for less than their liquidation value).

Burry also mixes in the types of companies favored by Warren Buffett – companies with a sustainable competitive advantage, as demonstrated by longstanding and stable high returns on invested capital – if they become available at good prices. These can include technology companies if Burry is able to understand them. However, like the other rare birds Burry invests in, Buffett-style investments are hard to find, so Burry considers these longer-term investments.

Portfolio Management

Dr. Michael Burry believes that portfolio management is just as important as stock picking. Good portfolio management requires an investor to answer several essential questions: What is the optimum number of stocks to hold? When to buy? When to sell? Should one pay attention to diversification among industries and cyclicals vs. non-cyclicals? How much should one let tax implications affect investment decision-making? Is low turnover a goal?

Burry says that in large part, the answers to these questions are “a skill and personality issue, so there is no need to make excuses if one’s choice differs from the general view of what is proper.” Here is how Burry manages his portfolio:

What is the optimum number of stocks to hold?

“I like to hold 12 to 18 stocks diversified among various depressed industries, and tend to be fully invested. This number seems to provide enough room for my best ideas while smoothing out volatility, not that I feel volatility in any way is related to risk. But you see, I have this heartburn problem and don’t need the extra stress.”

When should you buy a stock?

“As for when to buy, I mix some barebones technical analysis into my strategy — a tool held over from my days as a commodities trader. Nothing fancy. But I prefer to buy within 10% to 15% of a 52-week low that has shown itself to offer some price support. That’s the contrarian part of me.“

When should you sell a stock?

Investing is Neither Science nor Art… It’s a Scientific Art

Finally, Michael Burry warns that fundamental analysis isn’t infallible – sometimes the market never reflects true intrinsic value, sometimes other investors have more information than you do, sometimes you might make a mistake. But fundamental analysis is at least a way of putting the odds on your side.

Michael Burry concludes with this:

“In the end, investing is neither science nor art — it is a scientific art. Over time, the road of empiric discovery toward interesting stock ideas will lead to rewards and profits that go beyond mere money. I hope some of you will find resonance with my work — and maybe make a few bucks from it.”

More on Dr. Michael Burry

For more about Dr. Michael Burry’s investing strategy and stock picks, be sure to check out: How to Invest in Water Like Dr. Michael Burry from the Big Short.

The Big Short: Inside the Doomsday Machine

BY MICHAEL LEWIS

The #1 New York Times bestseller: a brilliant account―character-rich and darkly humorous―of how the U.S. economy was driven over the cliff. Michael Lewis proves yet again that he is the finest and funniest chronicler of our times.

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The Big Short (2015)

BLU-RAY, DVD, AND STREAMING

STARRING: CHRISTIAN BALE, STEVEN CARELL, RYAN GOSLING, & BRAD PITT

Based on the true story of four outsiders who saw what the big banks, media and government refused to: the global collapse of the economy. A bold investment leads them into the dark underbelly of banking, where everyone and everything is in question.

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The Ultimate Guide to Value Investing

Do you want to know how to invest like the value investing legend Warren Buffett? All you need is money to invest, a little patience—and this book. Learn more

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Let’s break down the history behind it and explain the steps involved so you can apply it in your own life. We can’t promise you’ll achieve the same success as Mr. Buffet himself, but you’ll certainly be off to a good start.

Laser Focus

This is called focus.

As Alice Schroeder writes in The Snowball: Warren Buffett and the Business of Life:

Buffett ruled out paying attention to almost anything but business—art, literature, science, travel, architecture—so that he could focus on his passion.

Buffett himself has identified his focus as one of the major keys to his success. By the way, Bill Gates, Steve Jobs, and Mark Zuckerberg have all said the same thing. Another major key for success was having a good understanding of how to start their own businesses at such young ages. Here’s a few examples from Nowloan.co.uk.

So, how can YOU achieve Warren’s laser like focus too? The same way his pilot, Mike Flint, did.

Warren Buffett and his Pilot

Mike Flint was Buffett’s personal airplane pilot for 10 years. Flint had flown for 4 different U.S. Presidents before, so he was pretty good at flying. Yet he still felt as though he hadn’t achieved all of the career and life goals that he wanted to.

So one day Buffett jokingly says to Flint: “The fact that you’re still working for me tells me I’m not doing my job. You should be out going after more of your goals and dreams.”

So Flint asks Buffett for his help, and Buffett tells him to go through this 3-step exercise.

Here’s how it works (you can play along at home, too)…

Step 1

Buffett started by asking Flint to write down his top 25 goals – the things that came to mind when he thought of success in his career and life. So, Flint took some time and wrote them down.

Step 2

Then, Buffett asked Flint to review his list and circle his top 5 goals – the things that were most important to him and that he wanted more than anything else in the world.

This was a lot harder for Flint, since everything on his list was important to him (after all, that’s why he wrote them down). But Warren insisted that he could only pick five, so after some time and thought, he made five circles.

“Are you sure these are the absolute highest priority for you?” Warren asked. Steve confidently replied that they were.

Step 3

At this point, Flint had two lists. The 5 items he had circled were List A and the 20 items he hadn’t circled were List B.

Waren now asked Flint when he planned to get to work on these top 5 goals and what his approach would be.

Flint explained, “Warren, these are the most important things in my life right now. I’m going to get to work on them right away. I’ll start tomorrow. Actually, no I’ll start tonight.”

Flint went on to explain his plan, who he would enlist to help him, when he expected to complete each item…

And that’s when Buffett asked him about the second list, “And what about these other 20 things on your list that you didn’t circle? What is your plan for completing those?”

Flint replied, “Well the top 5 are my primary focus, but the other 20 come in at a close second. They are still important so I’ll work on those intermittently as I see fit as I’m getting through my top 5. They aren’t as urgent, but I still plan to give them a dedicated effort.”

To which Buffett replied:

“No. You’ve got it wrong, Mike. Everything you didn’t circle just became your ‘avoid at all cost list’. No matter what, these things get no attention from you until you’ve succeeded with your top 5.”

Learning to Say “No”

I think the story of Warren Buffett and his pilot is brilliant and yet so unconventional.

We have so many things in our life that we want to do. Who wouldn’t want to succeed at 25 different things? But when we chase after 25 things at once, that’s when we run the risk of becoming a jack-of-all trades, but a master of none.

Who wouldn’t want to succeed at 25 different things? But when we chase after 25 things at once, that’s when we run the risk of becoming a jack-of-all trades, but a master of none.

And this is why Warren Buffett’s Not To Do List is so helpful.

Items 6-25 on your list are probably all very important things, and things that you care about and that matter to you. But when it comes to Items 1-5, Items 6-25 are a distraction.

As James Clear writes, “Spending time on secondary priorities is the reason you have 20 half-finished projects instead of 5 completed ones.”

The ‘Not To Do’ List Concept

The Not To Do List concept is very similar in theory to the idea behind Gary Keller’s and Jay Papasan’s book The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results. The book debunks the theory that multitasking is the path toward success. Instead, ask yourself what is the most important thing you can do today? The ONE thing that would make everything else in your life either easier or unnecessary?

Create Your Own “Not To Do” List

So put away your scheduler, your planner, your to do list apps, and your timers. Instead, take out a sheet of paper and make your own Not To Do List.

The steps are easy:

1. Write down your top 25 goals
2. Circle your top 5 goals
3. Avoid working on any goal that is NOT circled at all costs

Once you have your two lists, focus all your efforts on dominating your top 5 goals and ruthlessly eliminate the 20 less important goals.

It couldn’t be simpler than that.

The Ultimate Guide to Value Investing

Do you want to know how to invest like the value investing legend Warren Buffett? All you need is money to invest, a little patience—and this book. Learn more

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Summary

This is why I love Warren Buffett. His wisdom goes well beyond just investing and business, and really touches all aspects of life.

The Snowball: Warren Buffett and the Business of Life

BY ALICE SCHROEDER

Here is THE book recounting the life and times of one of the most respected men in the world, Warren Buffett. The legendary Omaha investor has never written a memoir, but now he has allowed one writer, Alice Schroeder, unprecedented access to explore directly with him and with those closest to him his work, opinions, struggles, triumphs, follies, and wisdom. The result is the personally revealing and complete biography of the man known everywhere as “The Oracle of Omaha.”

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The ONE Thing: The Surprisingly Simple Truth Behind Extraordinary Results

BY GARY KELLER AND JAY PAPASAN

The ONE Thing has made more than 275 appearances on national bestseller lists, including #1 Wall Street Journal, NewYork Times, and USA Today. It won 12 book awards, has been translated into 26 languages, chosen as one of the Top 5 Business Books of 2013 by Hudson’s Booksellers and one of Top 30 Business Books of 2013 by Executive Book Summaries. Voted one of Top 100 Business Books of All Time on Goodreads.

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What Stocks is Warren Buffett Buying

Recent Exits and Entries

Reporting Period	Exit	Buy
Q3 2023	ATVI GM CE JNJ PG MDLZ UPS	LLYVK LLYVA SIRI BATRK
Q2 2023	MCK MMC VTS	DHI NVR LEN-B
Q1 2023	BK RH TSM USB	COF DEO VTS
Q4 2022	/	/
Q3 2022	STOR	TSM LPX JEF
Q2 2022	RPRX VZ
Q1 2022	ABBV BMY WFC	ALLY C CE HPQ MCK MKL OXY PARA
Q4 2021	SIRI TEVA	ATVI FWONK NU
Q3 2021	LBTYK MRK OGN	FND RPRX
Q2 2021	AXTA BIIB LBTYA	OGN
Q1 2021	SU SYF	AON

Warren Buffett Portfolio Tracker: Track stock picks and portfolio changes of the legendary value investor.

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Berkshire Hathaway Portfolio by Sector

Berkshire Hathaway’s portfolio is now dominated by the Technology sector, overtaking the Financial Services sector.

The biggest holding in the technology sector is still Apple Inc (APPL), representing 87.39% of total holdings in this sector as well as 50% of the total portfolio’s value.

The Financial Services holdings are much more diversified with companies in different industries but are still dominated by Bank of America (BAC) and American Express (AXP) which together make up close to 83% of all holdings in this sector.

Number of Shares per Sector

The chart below shows which sectors dominate Berkshire Hathaway’s portfolio by the number of shares owned by the company.

Value of Shares per Sector

The chart below shows the total value of shares* in Berkshire Hathaway’s portfolio broken down by sector.

*The value of shares is calculated on the dollar value of the shares on the portfolio date.

Berkshire Hathaway Portfolio Value (2013- 2023)

The dollar value of shares in Berkshire Hathaway’s portfolio on the reporting date (in thousands).

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Let’s take a closer look at the insurance float and how Buffett used it to lay the foundation of his wealth.

What Is an Insurance Float?

Most people understand insurance industry terms such as premiums (the money a policyholder pays every month or every year for an insurance policy) and claims (the money an insurer must pay out).

But do you know what happens to your paid premiums once they’re sent to the insurance company?

Insurers don’t pay out all the money they collect right away. Rather, an insurance company will collect money in the form of premiums, invest that money, and then pay out claims as needed at some future date. The difference between premiums collected and claims paid out is called the insurance float.

It’s a lot like how a bank will collect deposits, invest that money (through loans to other people or companies), and then repay your money at some future date when you eventually make a withdrawal.

The insurance float has been a huge contributor to Warren Buffett’s success with Berkshire Hathaway. Because premiums received are essentially like loans from policyholders (that only need to be paid back when a claim is made sometime in the future), Buffett has been able to use insurance float as leverage when investing in stocks and private companies, which has a significant (positive) impact on the company’s return for its shareholders.

Insurance companies were among Buffett’s earliest holdings. He purchased National Indemnity and related companies in 1967 and subsequently added GEICO and National Re. He now operates multiple insurance ventures under the Berkshire Hathaway brand.

It’s part of the reason why Berkshire Hathaway’s book value and market value have grown at ~20% per year since 1965 compared to just 10% per year for the S&P 500 (including dividends)!

Warren Buffett and Berkshire Hathaway’s Insurance Float

The insurance float represents the available reserve, or the funds available for investment, once the insurer has collected premiums but is not yet obligated to pay out in claims.

In his 2002 Berkshire Hathaway Shareholder Letter, Warren Buffett explains:

To begin with, the float is money we hold but don’t own. In an insurance operation, float arises because premiums are received before losses are paid, an interval that sometimes extends over many years. During that time, the insurer invests the money. This pleasant activity typically carries with it a downside: The premiums that an insurer takes in usually do not cover the losses and expenses it eventually must pay. That leaves it running an “underwriting loss,” which is the cost of float. An insurance business has value if its cost of float over time is less than the cost the company would otherwise incur to obtain funds. But the business is a lemon if its cost of float is higher than market rates for money.

So insurance float is the difference between premiums received today over claims that must be paid many years in the future. During that time, the insurer invests the money. Insurance float is so valuable that insurance companies often operate at an underwriting loss – that is, the premiums received are not enough to cover the eventual losses (hurricanes, car accidents, etc.) that must be paid and the expenses required to resolve those claims, operate the business, etc.

Why would an insurer operate at a loss? Again, because the insurer can invest the insurance float and make even more money. In this sense, insurance float is like a loan, and the underwriting loss is like the interest rate on that loan (i.e. cost of capital).

Now, for most insurers, the cost of float is usually a few percentage points. Berkshire Hathaway’s insurance operations, however, are so well run that the company’s historical cost of float has actually been positive… meaning Berkshire Hathaway is actually being paid to take other people’s money!

The Details, in Buffett’s Words

Here’s an even more in-depth explanation of insurance float from Warren Buffett’s 2016 Berkshire Hathaway Shareholder Letter:

“One reason we were attracted to the P/C [Proprty & Casualty] business was its financial characteristics: P/C insurers receive premiums upfront and pay claims later. In extreme cases, such as claims arising from exposure to asbestos, payments can stretch over many decades. This collect-now, pay-later model leaves P/C companies holding large sums – money we call “float” – that will eventually go to others. Meanwhile, insurers get to invest this float for their own benefit. Though individual policies and claims come and go, the amount of float an insurer holds usually remains fairly stable in relation to premium volume. Consequently, as our business grows, so does our float…

We may, in time, experience a decline in float. If so, the decline will be very gradual – at the outside, no more than 3% in any year. The nature of our insurance contracts is such that we can never be subject to immediate or near-term demands for sums that are of significance to our cash resources. This structure is by design and is a key component in the unequaled financial strength of our insurance companies. It will never be compromised.

If our premiums exceed the total of our expenses and eventual losses, our insurance operation registers an underwriting profit that adds to the investment income the float produces. When such a profit is earned, we enjoy the use of free money – and, better yet, get paid for holding it.

Unfortunately, the wish of all insurers to achieve this happy result creates intense competition, so vigorous indeed that it sometimes causes the P/C industry as a whole to operate at a significant underwriting loss. This loss, in effect, is what the industry pays to hold its float. Competitive dynamics almost guarantee that the insurance industry, despite the float income all its companies enjoy, will continue its dismal record of earning subnormal returns on tangible net worth as compared to other American businesses.

Nevertheless, I very much like our own prospects… Moreover, our P/C companies have an excellent underwriting record. Berkshire has now operated at an underwriting profit for 14 consecutive years, our pre-tax gain for the period having totaled $28 billion. That record is no accident: Disciplined risk evaluation is the daily focus of all of our insurance managers, who know that while float is valuable, its benefits can be drowned by poor underwriting results. All insurers give that message lip service. At Berkshire, it is a religion, Old Testament style.”

At the end of 2016, Berkshire Hathaway’s insurance float totaled $91.6 billion! And because Berkshire Hathaway’s insurance operations are run at an underwriting profit, the company’s insurance float is essentially like a $91.6 billion interest-free loan that Berkshire is actually being paid to take (Buffett says Berkshire earned $28 billion of pre-tax income over 14 years – in other words, the Company was basically paid $2 billion a year to borrow $91.6 billion, which it could then use to invest).

Now, compare this investing model to that of private equity firms or hedge funds, who also use leverage to invest… but instead of cost-free insurance float, these PE funds and hedge funds usually use high yield loans with interest rates of 7%+ per year.

Moreover, Berkshire Hathaway’s insurance contracts are structured in such a way that it will never have to pay back more than 3% in any one year – while a high yield loan might have to be paid back in full if a private equity company or hedge fund’s performance falls below a certain level.

Viewed in this light, the Berkshire Hathaway insurance float model is clearly genius.

It’s really no wonder that Warren Buffett is one of the richest people in the world.

The Ultimate Guide to Value Investing

Do you want to know how to invest like the value investing legend Warren Buffett? All you need is money to invest, a little patience—and this book. Learn more

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Bill Ackman Portfolio Value (2013- 2023)

The dollar value of shares in the Pershing Square portfolio on the reporting date (in thousands).

Exits & Entries

Recent Exits and Entries

Sector Analysis

Bill Ackman Portfolio Tracker: Track stock picks and portfolio changes of the legendary investor.

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