Here's a newsflash: Warren Buffett is not a dumb man.
In fact, he's a genius. After all, he didn't earn the moniker "Oracle of Omaha" for nothing. Just look at his latest annual letter to Berkshire Hathaway (BRK.A) - Get BRK.A Report shareholders on Saturday, it was chock full of wisdom ... as always.
In honor of Buffett's latest wisdom drop, let's take a look at some of his biggest, most widely watched investment strategies in recent history.
First, it's important to understand just how savvy Buffett's Berkshire is at its core. According to Meyer Shields, managing director at Keefe, Bruyette & Woods, "the key to Berkshire's success has been the ability to use other people's money."
Berkshire has smartly utilized what Buffett calls "float" from its healthy insurance businesses to then invest in a wide range of sectors, from tech to transportation to finance. At the very core of Berkshire's successful investing is its successful insurance business, Shields told TheStreet.
"The real secret is that it's funded by insurance floats," he said. It's not that other insurance-exposed firms aren't doing the same thing -- Fairfax Financial Holdings, Alleghany Corp. (Y) - Get Alleghany Corporation Report , even W.R. Berkley Corp. (WRB) - Get W. R. Berkley Corporation Report to some extent all make similar moves. But none are as diversified as Berkshire, Shields said.
That's because Berkshire has simply been at it for a really long time. The company first took a stake in what would become Geico in the 1970s, meaning it's had almost half a century to build up floats for further non-insurance investments. Pretty smart.
Buffett operates with a "circle of competence" theory, Trip Miller, managing partner at Gullane Capital Partners, which holds a long position in Berkshire, told TheStreet earlier this year. That means he stays within the realm of what he knows and doesn't stray from it just to follow a hot trend.
That's why it still baffles me that there are investors out there who call Buffett a dinosaur or a failure for choosing not to invest in something hot like bitcoin.
"Buffett is staying away from bitcoin because he is an investor and not a speculator. An investor values an asset and then purchase it if the asset can be acquired for less than intrinsic value," Robert Johnson, President and CEO of the American College of Financial Services told TheStreet. Johnson also grew up in Omaha, went to school with Buffett's son Peter and has been a Berkshire shareholder and known Warren himself for years.
It's not the first time the investing chorus has erupted with criticism geared toward Buffett. He faced enormous backlash in the 1990s for his decision to stay away from internet stocks. Even then -- nearly 20 years ago -- he was criticized as old and outdated. But then the dotcom bubble popped, and Buffett was among those left standing tallest.
Berkshire recently hiked its Apple holdings 23% to 165.3 million shares, according to SEC filings. The move came two years after Buffett started getting in on Apple and despite his long-time concerns in investing in tech. When he bought the tech stock, he paid about $109 per share. Apple's stock now trades for $174. Buffett recognized the potential for the company and changed tune, and that's smart.
Buffett has still shied away from other tech names such as Action Alerts Plus holdings Alphabet (GOOGL) - Get Alphabet Inc. Class A Report and Amazon (AMZN) - Get Amazon.com, Inc. Report . And that's okay. At the crux of it all is Buffett's investing philosophy: You don't have to swing at every pitch.
"The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot," Johnson said. "And if people are yelling 'swing, you bum,' ignore them."
Respect the Oracle of Omaha people, and read his latest annual letter. Once you're done with that, read TheStreet's in-depth profile on how to live like Warren Buffett. We promise you'll be less dumb for it.
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