Has Warren Buffett become an ordinary investor?
Warren Buffett: Does the ultra-mediatized and ultra-rich investor really deserve his title of financial genius? If its successes are numerous, its failures are too but of course have been less publicized. Back on the incredible career of the oracle of Omaha.
A true public figure, Warren Buffett is known to be a virtuoso of the financial markets. Considered and respected businessman, regularly cited in the Forbes ranking of the richest men in the world, he remains a billionaire still as ambitious despite his age.
With a fortune tainted by the coronavirus crisis and estimated at just over $67 billion, he is now in fourth place in 2020 in this ranking. But behind this eloquent success obviously hides resounding failures linked to investments that are not always very well understood.
The first quarter of 2020 caused it the biggest loss in its history with nearly 50 billion dollars lost on the stock market, enough to call into question its hitherto unwavering skills.
Portrait of a powerful man.
Warren Buffett is a successful American businessman and investor. Nicknamed "the oracle of Omaha", he notably impacted the world of stock market investments. This is also the sector of activity in which he truly built his immense fortune. A great student of Benjamin Graham, he evolved under the wing of the latter after his studies at Columbia. He worked for two years at the Graham - Newman Corporation. This is where he forged and perfected his proven investment method over the years.
He returned after this short stay in his hometown to found a family business there. It was not until 1965 that he bought Berkshire Hathaway, a company specializing in the textile industry. He gradually transformed the latter and later erected it into an impressive holding company for his investments.
In the 1990s, his detractors attacked him, even prophesying about his downfall. Buffett is not destabilized and he feels rather galvanized by this situation. Indeed, sensing the damage of the boom in technology stocks and dotcoms looming on the horizon, he withdrew from these stocks, notably becoming an observer. This approach will later prove to be ingenious because in the end, it is he who was right. In the same vein, its strategy is very successful after the bursting of the Internet bubble. These repeated events increased his notoriety and compelled the admiration of all.
Moreover, he is also an outstanding strategist. As a value investor, he remains faithful to his principles. One of his famous phrases best paints his technique: "In investing, it's all about choice: picking the right stocks at the right time and keeping them as long as the companies remain of good quality". His trick remains quite simple as it is based on the intrinsic market value of the company. Starting from this affirmation, he very often shows himself to be quite wait-and-see to carry out the right actions at the best time. Undoubtedly this constitutes the most effective weapon with which he dominated the investment sector for several years.
Warren Buffett: colossus with feet of clay.
While Buffett's genius is beyond doubt, he is nonetheless human, with his potential share of mistakes and failures. His negotiating skills and his nerve, less publicized, offered him some juicy investments. So difficult to realize its real stock market performance as entrepreneurial performance seems to have been flourishing.
But it is possible to trace the following failures. His immense fortune has indeed fallen between 2019 and 2020, due to the losses recorded on these recent investments.
In 1993, through Berkshire Hathaway, Warren Buffet negotiated the takeover of Dexter Shoes, a shoe manufacturer and distributor, for $433 million. In the absence of competition in the sector. At the time, this investment was not crowned with success. Indeed, at the end of this operation, the shareholders will record colossal losses to the tune of 3.5 billion dollars. This experience is undoubtedly one of the most bitter of the man's rich career.
Four years prior, he traded US Airways preferred stock. He relied heavily on growth in the company's turnover. But very quickly, he realizes his illusion. The company was under enormous burdens which literally crippled its profitability. The firm has certainly achieved excellent figures but, in the end, few profits. From this operation, he learned the hard way that economic growth did not necessarily lead to profitability.
Fortunately for him, the man came out of it very well, since he later sold all his shares and therefore did not lose on this one, but also did not make a profit.
In 2008, he took many shares of Conoco Philips shares at exorbitant prices. He was certainly taken in by the euphoria that surrounded this company whose share price had been greatly overvalued. This investment, which aroused much optimism, turned out to be a stunning failure.
More recently, he admitted having made a big mistake in 2015 during the merger of the Kraft Heinz companies. Basically, it's more than $4 billion swallowed up in losses on the stock market.
A year earlier he had recorded nearly 433 million losses during an operation with the British group Tesco. He will later declare that he lacked flair by not selling his stake a little earlier.
Stock market genius or lucky character?
Despite its debacles, we can only note that among the stockbrokers, there are many called and few elected. How many have managed to build an empire as important as that of Warren Buffett and keep it over time? None.
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