Want to invest like Warren Buffett? Consider buying Berkshire Hathaway (NYSE: BRK.B) stock. Led by Buffett, co-chairman Charlie Munger and skilled managers, Berkshire Hathaway has outperformed the market for decades, and owning the stock gives you a piece of the famed conglomerate.
Berkshire Hathaway’s wholly owned subsidiaries include huge rail, insurance and energy companies, as well as big names such as Fruit of the Loom, Duracell, See’s Candies and Dairy Queen. He also has a powerful stock portfolio, recently valued at nearly $300 billion, including 20% from American Express and more than 5.5% from Apple, among many other holdings.
In recent years, Buffett has spent tens of billions of dollars to buy back (and essentially withdraw) many shares of Berkshire stock. This reduction in the number of shares leaves each remaining share with a larger stake in the company, to the benefit of the shareholders. Meanwhile, Berkshire still had $105.4 billion in cash at the end of the second quarter, which it can use to invest in struggling businesses or make new acquisitions.
Berkshire Hathaway is a well-managed company with a solid foundation, and the stock stands out as a relatively low-risk investment capable of generating returns that can match or even beat the broader market over the next few years. Also note that Buffett is 92 years old and a succession plan is in place. (The Motley Fool owns Berkshire Hathaway stock and recommended Berkshire Hathaway stock and options.)
ask the fool
Q Is it too late to refinance my mortgage? – SC, Columbus, Ohio
A. That may be the case because interest rates are higher than they have been in a long time. Refinancing often makes sense when prevailing rates are at least one percentage point lower than your current loan rate. It also depends on how long you plan to stay in the home – it will take several years of interest savings to cover the closing costs of refinancing.
Learn more at Fool.com/mortgages and Bankrate.com, and see if refinancing is right for you.
Q I’m 26 and wondering: should I invest money in CDs? – DB, Cadillac, Michigan
A. Certificates of deposit, or CDs, are solid choices for your short-term investments, and they’re more attractive than they’ve been in recent years, thanks to rising interest rates.
But even young people should consider saving and investing for retirement, and unless interest rates are high enough, CDs won’t do you much good for that. Money that you won’t need for at least five years (or, to be more conservative, 10 years), is likely to grow fastest in stocks, which for many years have outperformed bonds, cash and even gold.
Consider that many three- and five-year-old CDs have recently returned around 3.5%. You can supplement this with dividend-paying stocks. Walgreens Boots Alliance recently lost 5.75%, for example, while Intel lost 5.6%, 3M 5.2% and Citigroup 4.7%. These payments aren’t guaranteed, but many companies have been making them — and increasing them — consistently, for decades.
Moreover, the stock prices of healthy and growing companies should increase over time. CDs are good for short-term cash, for emergency funds, and when you need security more than growth.
My smartest investment
My smartest investment was to buy shares of Nvidia. It was the first stock I bought that won, and it really got me started on my investing journey. – MA, online
The madman responds: You did well indeed! Shares of semiconductor specialist Nvidia have recently risen nearly 17,000% over the past 20 years, representing an annual average of more than 29%. That’s enough to turn a $10,000 investment into $1.7 million. Even more impressive, these numbers are after the stock’s 65% drop from its high point last year. Its recent market value was nearly $300 billion.
You were lucky to have such a winner early in your life as an investor, as it certainly helps new investors see what is possible and can help them stick with it over time.
With any large stock, however, it is important to remember these things: The stock will not rise in a straight line; there will be pops and drops. And the business may not stay successful with a bright future – so you need to keep track of its progress and developments, just in case things change.
Nvidia shares are down this year partly because of the crash in the tech market, but also because of the cryptocurrency slowdown as cryptominers use the company’s graphics processing units, or GPUs. However, many still see its future as bright as it introduces new offerings and continues to dominate gaming chips.