Warren Buffett turns 90 tomorrow: Berkshire CEO’s 3-point check to spot great businesses to invest

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August 29, 2020 3:38 PM

Multi-billionaire investor Warren Buffett is an advocate of passive investing over the long term. The best way for investors to invest in a growing stock market over a period of time is to put money in the S&P 500 index fund.

Warren Buffett, Berkshire Hathaway, Apple, American Express, Coca-Cola, Bank of AmericaThe son of a US congressman, Warren Buffett first bought a stock at the age of 11, and filed taxes for the first time at an age of 13

Warren Buffett, one of the most successful investors of all time, will mark his 90th birthday tomorrow, 30 August 2020. The son of a US congressman, Warren Buffett first bought a stock at the age of 11, and filed taxes for the first time at an age of 13. The CEO of Berkshire Hathaway has a net worth of $82.4 billion, according to Forbes. Berkshire Hathaway’s stock price surged to $3,27,431 on August 28, 2020, from $8 in 1960. Multi-billionaire investor Warren Buffett is an advocate of passive investing over the long term.  He believes that the best way for investors to invest in a growing stock market over a period of time is to put money in the S&P 500 index fund. “In my view, for most people, the best thing to do is owning the S&P 500 index fund,” he said. “If you owned the businesses that you liked prior to the virus arriving, it changed prices, but nobody’s forcing you to sell,” Buffett said. 

Warren Buffett suggested ‘invest but do not borrow to do it’. “Stocks have an enormous advantage and if you bet on America, and sustain that position for decades, you’re going to do better than, in my view far better than, owning treasuries securities,” he said adding that borrowing to invest is not a good bet. “You never want to use borrowed money to buy into investments, and we run Berkshire that way,” he said.

Spotting businesses to invest

Earlier this year, Warren Buffett in his annual letter to Berkshire Hathaway shareholders, informed that he and Charlie Munger, his partner in managing Berkshire, constantly seek to buy new businesses that meet three criteria. First, they must earn good returns on the net tangible capital required in their operation. Second, they must be run by able and honest managers. Finally, they must be available at a sensible price. After they spot such businesses, their preference would be to buy 100 per cent of them.

Berkshire Hathaway Inc posted an 87 per cent on-year jump in the second-quarter profit and earned $26.3 billion, or $16,314 per Class A share, according to the Form 13F which gives a quarterly update of the company’s portfolio. Warren Buffett’s company bought roughly $2.1 billion worth of Bank of America stock in late July and early August to give it control of 11.9% of the bank’s stock, according to the Associated Press report. Approximately $5.1 billion was used to repurchase Berkshire shares during the second quarter bringing the six month total to $6.7 billion. Berkshire Hathaway Inc owns more than 90 companies, including BNSF railroad and insurance, utility, furniture and jewellery businesses. It has major investments in Apple, American Express, Coca-Cola and Bank of America as well.

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