In 2008, Warren Buffett was the richest man in the world, with a net worth of almost 62 billion. Just how did he amass so much money? This article identifies some of the sources of wealth for Warren Buffett.
Warren is a long-time veteran of the insurance business and owns insurance companies such as GEICO and reinsurers such as General RE.
Buffett bought GEICO on several occasions. His first interest in GEICO was piqued when he learned that his teacher Benjamin Graham sat on the board of the company. He invested heavily in GEICO in 1976, when GEICO reported staggering losses, with stock prices dropping to $2 a share. However, Buffett wisely perceived that GEICO’s problems stemmed not from problems in business fundamentals, but from an inept management. He eventually purchased the whole of GEICO, and proceeded to reap handsome returns from his investment.
However, one Warren Buffett quote on the insurance industry portended troubles that the industry will encounter after the collapse of the housing bubble: “That party is over. It’s a certainty that insurance-industry profit margins, including ours, will fall significantly in 2008.”
This household brand name was also a big money-maker for Warren Buffett and contributed greatly to Warren Buffett’s networth In 1988, Buffett secretly purchased boatloads of Coca-Cola shares. The president then was Buffett’s old neighbor. Buffett owned 7% of the company within a few months. Coca-Cola became one of Buffett’s best investments: in less than three years, Buffett’s Coca-Cola stock was worth more than the entire value of Berkshire.
Dot Com bubble
During the turn of the century, technology startups were the hottest thing on the planet. Warren’s competitors speculated in the technology bubble with such wild maxims as ‘Earnings do not matter anymore’. Warren was sidelined for several years while everyone else seemed to make enormous profits investing in hot startups.
Confident that the technology bubble would burst, Warren Buffett continued to do what he did best: allocate capital into great businesses that were selling below intrinsic value – none of which, during the dot com bubble, were technology companies. When the bubble eventually collapsed, Warren Buffett was finally proven right.