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Berkshire Hathaway Inc. (NYSE:BRK.A) & Berkshire Hathaway Inc. (NYSE:BRK.B): One Important Lesson That Warren Buffett Taught

Boston, MA 06/16/2014 (wallstreetpr) – Back in 2001, Warren Buffett had addressed in his letter to shareholders of Berkshire Hathaway Inc. (NYSE:BRK.A) and Berkshire Hathaway Inc. (NYSE:BRK.B), “I will tell you now that we have embraced the 21st century by entering such cutting-edge industries as brick, carpet, insulation and paint. Try to control your excitement.” Those words resembled the investment philosophy of Buffett in 2000, who decided to invest in the basic and simple businesses instead of getting lured by the exciting tech stocks that had caught the investment trend during that period.

Unexciting But Powerful

Some of the companies, in which Buffett took stake included, CORT Business Services, MidAmerican Energy, Justin Industries, Ben Bridge Jeweler, Shaw Industries, United States Liability Insurance Group, Johns Manville and Benjamin Moore. All those companies had one thing in common that they all are in some way or other catered to the housing industries. In fact, those companies could essentially be linked to basic requirements when a house is built, that is, “brick, carpet, insulation and paint”.

Buffett’s investment, then had created a little excitement among his shareholders, who were captivated by the promises of tech industries. But, Buffett acted as usual, wise, who strongly believed in the idea that simple businesses could create effective and efficient returns, an ideology contrary to the faith that big is beautiful.

A Simple Logic

Fourteen years through the decision, all that remains to fall back upon ishow Buffett’s vision was impeccable and to the point. Those same simple companies delivered strong results, in synchronization, to the growing housing sector development. Even amid the financial crisis during 2008, when most of the companies suffered huge loss, Buffett’s companies were steering it out clear, with no hurdles.

The great investment theory has a very simple logic that unlike the flashy IT or Tech stocks, which are linked to high profile customers, Buffett’s favorite companies were involved in a basic business that are central to economic development. Thus, had low risk, but great opportunities, the point that investors generally miss.

Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.



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