Learning Economics! Did the Oracle of Omaha, Warren Buffett, Achieve a Ten-Bagger?
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Was Buffett able to achieve a ten-bagger?
As an individual investor, you might wonder: if I buy the so-called “Buffett stocks” that Warren Buffett purchases, can I benefit from a “remora fish business strategy” and enjoy the gains from rising stock prices?
It is said that stocks owned by Warren Buffett become “ten-baggers” (stocks that increase in value by 10 times or more).
Therefore, I will examine the episodes of famous stocks that symbolize him, and whether they actually became “ten-baggers” (stocks that increased in value by 10 times or more).
1. How to buy “Buffett stocks”
There are broadly two approaches for individual investors to invest in the same stocks as Buffett.
Method 1: Purchase individual Buffett stocks yourself
You can purchase major stocks held by Buffett (such as Apple, Coca-Cola, American Express, etc.) or the five major Japanese trading companies through domestic securities firms (such as SBI Securities, Rakuten Securities, Monex Securities, etc.).
For US stocks
Open a foreign stock account with a securities firm and enter the ticker symbol (stock identification code) to purchase (e.g., Apple = AAPL, Coca-Cola = KO, American Express = AXP). US stocks can be purchased in 1-share units.
For Japanese stocks (the five major trading companies), you can purchase Mitsubishi Corporation (8058), Itochu Corporation (8001), etc., in standard units (100-share units) or mini-shares (1-share units).
Method 2: Buy shares of Buffett’s company, “Berkshire Hathaway” (BRK.B)
Instead of buying individual Buffett stocks, you can purchase shares of the investment company led by Buffett, “Berkshire Hathaway” itself.
By buying just this one, you effectively achieve the same effect as investing in Buffett’s entire investment portfolio (and even his private operating companies).
*While “Class A” shares are expensive, costing tens to hundreds of millions of yen per share, “Class B” shares can be purchased for tens of thousands of yen.
2. Episodes of major Buffett stocks and verification of “ten-bagger” achievement
I will examine the episodes of representative stocks that Buffett has held for many years (or had great success with) and verify whether they became ten-baggers (stocks that increased in value by 10 times or more).
① Coca-Cola (KO)
《Purchase Episode》
Immediately after the 1987 Black Monday (the global stock market crash), he began buying in large quantities starting in 1988.
Buffett himself is a heavy user who drinks several Cherry Cokes every day, and he focused on the “strong moat (brand power)” and “pricing power” that the brand is recognized for worldwide.
《Did it become a ten-bagger?》
【Achieved (several dozen times or more)】 Considering the adjusted stock price at the time Buffett purchased it, the stock price itself has risen more than 15 to 20 times.
What is even more important is the “dividend.” The current annual dividend yield on the principal Buffett acquired has reached over 50%, making it a phenomenal super ten-bagger where “every year, more than half of the purchase amount is returned just in dividends.”
② American Express (AXP)
《Purchase Episode》
His first encounter was during the 1960s fraud case known as the “Salad Oil Scandal.”
When the stock price plummeted, Buffett observed local restaurants and hotels and confirmed that customers and stores were still using Amex cards, so he concentrated his investment. Later, he increased his holdings again in the 1990s.
《Did it become a ten-bagger?》
【Achieved (approximately 30 times or more)】 Looking at the full-scale purchase price (average acquisition cost) in the 1990s, the current stock price has jumped more than 30 times, making it a ten-bagger stock without a doubt.
③ Apple (AAPL)
《Purchase Episode》
He began investing in 2016. Although Buffett used to avoid tech stocks, he viewed the iPhone as a “daily necessity that you can’t switch away from once you use it (the ultimate consumer good),” and he valued the aggressive “share buybacks (shareholder returns)” by CEO Tim Cook, growing it into the largest stock in his portfolio.
《Did it become a ten-bagger?》
【Achieved (over approximately 7 to 10 times)】 Looking at the stock price (after stock splits) from the initial purchase period in 2016, the stock price reached and surpassed nearly 10 times (a ten-bagger) at its peak.
It is a legendary investment example that brought Berkshire one of its largest unrealized gains in history in a short period.
④ The five major Japanese trading companies
(Mitsubishi Corporation, Itochu Corporation, Mitsui & Co., Sumitomo Corporation, Marubeni)
《Purchase Episode》
In August 2020, Buffett announced that he had acquired shares in the five major Japanese trading companies, surprising the world.
He highly valued the Japanese trading company business for reasons such as “being left undervalued (PBR below 1x),” “generating stable cash through diverse businesses,” and “having a high dividend yield.”
《Did it become a ten-bagger?》
【Not 10 times yet, but a rapid growth of approximately 3 to 4 times】 Looking from the time of the announcement in 2020, the stock prices of the trading companies have surged by about 3 to 4 times.
Although it has not yet reached 10 times (a ten-bagger), it has achieved phenomenal performance in just a few years.
Summary
At the root of Buffett’s stock selection is the principle of “buying wonderful companies with strong advantages at a fair price and holding them for decades.”
If you choose the right stocks, like Coca-Cola, Amex, or Apple, and hold them for the long term,
Not only can the stock price itself become a ten-bagger, but you can also reach the pinnacle of compound interest, where you can recover your initial investment every year through dividends alone.
[Disclaimer]
This article summarizes the author’s personal views based on research and analysis and does not recommend the purchase or sale of any specific financial products or stocks.
Trading financial products, including stock investments, involves risks such as price fluctuations, exchange rate risks, and performance volatility, which may result in the loss of your initial investment.
While the information in this article is based on materials considered reliable at the time of writing, its accuracy, completeness, and timeliness are not guaranteed.
Please make final investment decisions based on your own objectives, financial situation, and risk tolerance, and at your own responsibility.
Please note that the author cannot be held responsible for any losses incurred through the use of the information in this article.
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