He buys stocks that are safe (with low beta and low volatility), cheap (value stocks with low price-to-book ratios), and high-quality (meaning stocks that are profitable, stable, growing, and with high payout ratios)."
It would be interesting to see his starting amount and year by year performance numbers. I don't see how buying inexpensive low beta value stocks gets you to the richest person in the world. Low beta means it's hard to have many stocks that are blowing out the lights on the upside, they're just moving up consistently. You still gotta start with a whole lot to get up to a net worth of $35 billion or wherever he is at.
It would also be interesting to see what Berkshire pays in annual capital gains taxes. A cheap stock can't have the share price go up much and also remain cheap. When the share price goes up the same stock becomes expensive, so does he sell and pay the capital gains taxes? That also makes it really hard to get to $35 billion.
In regard to taxes, I think it's nuts that guys like Buffet and Gates can make $35 billion in unrealized capital gains in their lifetime, then, rather pay inheritance taxes on the gain when they pass away, give it all - tax free - to some foundation that their heirs control. If some dude making $1 million in salary in one lucky high earning year has to pay 38% federal tax it doesn't seem right that Gates can have a good capital gains year and have his net worth up $5 billion, yet owe nothing on that $5 billion because he didn't see his stock.
Oh, by the way, this post is a bit off topic! |
