Mr. Buffett has achieved a high compound income growth rate in the past half-century, beating the S&P 500 index. In the field of global investment, he is a unique existence, so he is regarded as a “stock god”.
When it comes to successful experience, Mr. Buffett always talks about the concept of “value investment”. So what is value investing? What is the magic of this investment philosophy?
The author believes that the investment in American Express is a good example of the value investment philosophy that Mr. Buffett insists on. As of the end of 2020, American Express, which holds 152 million shares, is the fourth largest stock of Berkshire Hathaway under the control of Mr. Buffett. Since then, American Express shares have risen by 20%. This has increased the value of Berkshire Hathaway’s holdings in American Express by approximately US$4 billion, reaching US$23 billion, which has exceeded the value of its holdings in Coca-Cola stocks.
The story between Mr. Buffett and American Express does not stop there. It has been 25 years since the father started with American Express. Since 1998, he has never adjusted the position of American Express. This means that Mr. Buffett invested 1.3 billion U.S. dollars to build a position in American Express, and his income so far is nearly 18 times.
This shows how wise Mr. Buffett’s decision to invest heavily in American Express was. The old man looked at the overall situation of the global economy and determined that this credit card company has huge room for business development in the future and will bring him stable and strong cash returns. Facts have proved that the judgment of “stock god” is completely correct. The selection of individual stocks is the first priority and one of the core of the value investment philosophy.
Another core concept of value investing is centralized investment. Since Mr. Buffett is very optimistic about the development prospects of American Express, he invested heavily. At present, Mr. Buffett’s largest holding stock-Apple’s holding value accounts for about 48% of his total holding value, which is also a very good embodiment of the concept of centralized investment.
Another core concept of value investing is long-term holding. Berkshire Hathaway has held American Express for 25 years and has never adjusted its position since 1998. Because the value of a really good company is like a pot for a long time, the longer it will last. Mr. Buffett’s other heavyweight, Coca-Cola, has a longer holding history than American Express.
Of course, the value investment philosophy does not mean “set in stone”. Regarding another former “good-hearted” bank-Wells Fargo, Mr. Buffett significantly reduced his position last year, mainly because of major problems in the operation and management of Wells Fargo Bank. Therefore, investors’ use of value investment concepts must also change with time, with events, and with local conditions.
JerryZang
Disclaimer: The content and opinions of this article are for reference only and do not constitute any investment advice. Investors operate accordingly at their own risk. For all accurate information about the market, please refer to the relevant official announcement. Market risk, the investment need to be cautious.
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