Over the past 4 decades, business investor Warren Buffett developed and mastered a strategy of investing into businesses that require little investment, does not require massive amounts of additional management and generates revenue mainly because the company holds wealth. Over the past few years, Warren Buffett has decided to change his investment strategy.
Buffett’s current strategy of investing into business that requires him to build the foundation, infrastructure, and management is different from him purchasing business that already have theses systems in place, refer to Stansberry Research. Historically, Warren Buffett invest into companies such as Apple (AAPL), American Express (AXP), Coca-Cola (KO), Gillette, Walt Disney (DIS), McDonald’s (MCD), Washington Post (GHC), and Wells Fargo (WFC). These companies are stable and with Buffet’s investment can increase their profitability; however by Buffett investing into businesses has that require building new systems, management and structure, his profitability and legacy may be questioned in the future (Stansberryresearch). Two investments that may hurt Buffett the most are Berkshire Hathaway Energy and the Burlington Northern Santa Fe (“BNSF”) railroad. These two regulated utilities consumed 44% of Berkshire’s earnings last year (excluding investment income). This is not a common investment practice for Buffett.
The image of the “Great American Businessman” seems to be Buffett’s gift and curse says Stansberry Research. Great American companies like American Express (AXP), Coca-Cola (KO) and Gillette were great investments. Unfortunately, the concept of investing money to save the American empire may not end with the high profits that Buffett is accustomed. Another questionable investment for Buffett is his estimated investment of around $20 billion in four banks – Wells Fargo, U.S. Bancorp (USB), Bank of New York (BK), and Bank of America (BAC).
According to Stansberry Research, the main problem with Buffett’s new investment techniques are that Buffett’s money usually enhances an already stable business; his money normally does not develop a business and provide the unique management skills required to build new or failing businesses.
NOTE: Warren Buffett has invested more money into the banking industry that he invested into American Express or Coke. This could lead to trouble for the US banking industry if something happens to Buffett’s wealth (https://stansberryam.com/portfolio-management/stansberry-research/).