Periodically, an investor rises to fame, hailed by financial media as the "next Warren Buffett." However, their subsequent performances often lead to disappointment, proving they are not the "Oracle of Omaha." Digital currency exchange FTX's founder, Sam Bankman-Fried (SBF), who is currently facing criminal charges, is an extreme example of this.
Aside from Sam Bankman-Fried, others have suffered from the "curse" of being dubbed the "next Buffett." Bill Ackman of Pershing Square, former CEO of Sears Eddie Lampert, and Chamath Palihapitiya of Social Capital have all been referred to as the "next Warren Buffett" at some points in their careers, yet their performances have failed to compare to the 92-year-old investment legend.
Since taking over Berkshire Hathaway in 1965, Buffett has confirmed his unique position in the investment world.
What makes Buffett an irreplaceable figure? Berkshire Hathaway claims that since Buffett's acquisition of a majority of Berkshire's shares during the Johnson era, the company has amassed an incredible array of diversified businesses, from GEICO Insurance and BNSF Railways to nearly 6% of Apple's shares and 100% of Dairy Queen, among others.
Gregory Warren, a Berkshire analyst at Morningstar, mentions that Berkshire's moat includes not only an unparalleled balance sheet and hundreds of billions in cash but also Buffett's exceptional investing acumen.
In the stock market frenzy of the 1960s, Buffett acquired the then-troubled Berkshire Hathaway textile manufacturing company. Through decades of effort, he transformed it into a diversified holding company led by its insurance business. This week, driven by a rebound in the insurance business, Berkshire reported a record operating profit of over $10 billion for the three months ending in June, propelling its stock price to new highs.
Since Buffett took control of Berkshire, the company's valuation has climbed 3,787,464%. Additionally, from 1965 to 2022, Berkshire's annualized stock return was 19.8%, double the 9.9% return of the S&P 500.
Whitney Tilson, CEO of Empire Financial Research and a Berkshire shareholder, says that Berkshire offers a unique blend of safety, growth, and undervaluation. The company's stock is not only "America's number one retirement stock" but also a cornerstone of any conservative investment.
Buffett has explained that holding significant cash reserves is necessary both as an insurance company and out of a responsibility to shareholders. Furthermore, substantial cash reserves provide a competitive edge during market volatility, such as saving Salomon Brothers from a hostile takeover in 1987, injecting $5 billion into Goldman Sachs in 2008, and investing $5 billion into Bank of America in 2011.
Bill Stone, Chief Investment Officer of Glenview Trust and a Berkshire shareholder, states: "Berkshire's retention and expansion of cash reserves on its balance sheet allows it to seize and capitalize on opportunities during any downturn."
Chamath Palihapitiya, founder and CEO of Social Capital, after analyzing Buffett's investments in Japan, declared Buffett as "the greatest of all time." In August 2020, Buffett invested over $6 billion in Japan's five major trading companies—Mitsubishi, Marubeni, Mitsui, Itochu, and Sumitomo. Since the beginning of this year, Mitsubishi and Marubeni's stock prices have risen more than 60%, with Mitsui, Itochu, and Sumitomo also seeing gains of over 35%.
Although Buffett has traditionally steered clear of tech stocks, Berkshire's Apple shareholding has now exceeded $170 billion, making it the largest single holding in Buffett's portfolio. Initially, Buffett treated Apple like a consumer goods company, attracted by its massive buyback program.
Since 2016, the investment in Apple has netted Berkshire well over $100 billion. Whoever the next "Oracle of Omaha" is, they can only dream of replicating such performance.
