Warren Buffet’s current net worth in 2021 is $110.3 billion in U.S. dollars making him currently the sixth richest person in the world at 90 years old according to Forbes.
How did Warren Buffett build his fortune?
Warren was very interested in creating his own businesses and investments from a very young age. At just seven years old he was motivated by a book he found in his local public library called One Thousand Ways to Make $1000. This book got him started thinking about different ways to make money at a young age, it was like a game to him and he loved it.
His childhood businesses included selling chewing gum, collecting glass Coca-Cola bottles to return for money, along with selling weekly magazines door to door in his hometown. He also worked retail part-time in his grandfather’s grocery store. During high school he delivered newspapers, sold golf balls he recovered from a local golf course, he sold stamps, washed and detailed cars. He and a friend formed one of his first business partnerships and spent $25 to buy a used pinball machine that they placed in a local barber shop. They liked the cash flow from the pinball business so much that he bought a few more of them to put in three more barber shops. His pinball machine business was later sold in less than a year for $1,200.
After being mentored by Benjamin Graham, Buffett’s first investment firm as a professional was Buffett Partnership, Ltd that he created in 1956 at 26 years old. By January of 1962, the Buffett Partnership had a value of over $7 million, with Buffett’s personal share being worth over $1 million. Mr. Buffett closed his Partnership in 1969, after great returns citing that he ran out of ideas, and retired as a millionaire still in his twenties.
Warren Buffett’s biggest investment started when he began purchasing Berkshire Hathaway stock in 1962 after noticing a price action pattern of the stock to go up after the company closed a mill. Buffett knew that the textile business was dying in the U.S. and Berkshire’s fundamentals were never going to improve as it slowly went out of business. He was just looking for a quick investment gain as its price was so low in comparison to its liquidation value based on assets it owned.
Warren Buffett first bought Berkshire Hathaway shares in 1962 for $7.50 a share. In 2021 Berkshire Hathaway Class A shares are approximately $440,000. The Berkshire Hathaway stock annual return (CAGR) is approximately +20.26% for the past 57 years.
After he was offended by a tender offer to buy his shares that was lower than a verbal agreement that was made, Buffett bought more Berkshire stock in 1964. He took control of the company through a majority of stock ownership and fired the guy that went back on the oral agreement to buy his shares at a higher agreed upon price. Buffett became the majority shareholder of a failing textile business through this incident.
He quickly pivoted the company from its traditional textile manufacturing to insurance and kept it under the same name. He would evolve Berkshire-Hathaway into a diversified holding company over time. He used the cash flow from the insurance premiums part of the business to acquire the best cash flowing businesses. He also started to build an investment portfolio for Berkshire of stocks in great publicly traded businesses that he would buy when a stock was at a good price. Berkshire Hathaway grew into a corporate conglomerate that is now the sixth biggest company in the United States.
Warren Buffett allowed Berkshire-Hathaway stock to grow in price to six figures as he did not want a stock split of its Class A shares because he wanted long-term investors in his company’s stock not short-term traders and speculators. In 1996, Berkshire-Hathaway did finally do a partial stock split to create Class B shares through a Unit Investment Trust and kept the per-share value of the smaller shares close to 1⁄30 of the original Class A share price.
Over 99% of all of Warren Buffett’s wealth and net worth was created by buying and holding Berkshire-Hathaway stock. Also, 99% of Warren Buffett’s wealth was created after his 50th birthday. This shows the power of compounding growth. Berkshire-Hathaway is the only stock he owns personally. When you hear about the Warren Buffett portfolio or Buffett stocks this refers to the Berkshire Hathaway holdings in the company’s stock portfolio.
Warren Buffett’s wealth was built through his personal ownership of just one stock: Berkshire-Hathaway. It was his management as CEO and Chairman of his company’s cash flow into building a portfolio of companies and stocks that created one of the greatest companies of all time through acquisitions and portfolio management. Warren Buffett used Berkshire-Hathaway as an indirect wealth building machine making himself and his investors very wealthy.
