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How Warren Buffett Became a Billionaire
One of Warren Buffett’s greatest investment ideas concerned “economic moats.”
What he meant by this was to invest in companies with significant competitive advantage that stops competitors from breaking into their market share. These competitive advantages served as “moats” around these businesses, much as a moat of water would protect a castle from intruders in medieval times.
To consider how “moat” investing works in the real world, let’s consider McDonalds (MCD).
For starters, MCD has a moat. MCD was launched in 1940. Burger King was launched in 1953. Wendy’s was launched in 1969.
Despite these competitors moving into its space, MCD has thrived, growing to become the largest hamburger based business in the world: its 2012 revenues were $27 billion compared to Burger King’s $1.9 billion and Wendy’s $2.5 billion.
Today, MCD has over 34,000 restaurants based in 199 countries employing 1.8 million people. Obviously the company is able to defend its market share from competitors. That’s an economic moat.
Between this and the company’s focus on producing returns to shareholders, those who invested in MCD and held for the long-term have dramatically outperformed the market and built literal fortunes.
Indeed, had you in McDonalds in 1986, you would have outperformed the S&P 500 by a simply enormous margin (see Figure 1 below). Not only that but you would have crushed every asset manager on planet earth with very few exceptions.
Regarding returns to shareholders, MCD has paid dividends every year for 37 years and has increased its dividend at least once per year.
Dividends per share have increased from $0.11 in 1986 to $2.87 in 2012. Those who invested in MCD shares in 1986 are receiving a yield of nearly 30% per year on their initial investment today just from dividends alone.
MCD is so focused on producing returns for shareholders that the company has bought back 23% of its shares outstanding in the last ten years. So even investors who bought in 2000 have experienced a synthetic yield of roughly 5% per year.
However, the most dramatic returns produced by “moat” investing are evident through the power of compounding as illustrated by MCD’s Dividend Re-Investment Plan or DRIP (a plan through which cash dividend payouts were automatically used to buy more MCD shares).
If you had invested in MCD’s DRIP program in 1988, you would have turned $1,000 into over $23,000 by the end of 2012. This is not by adding to your positions, this is the result of one single $1000 purchase of MCD stock.
This example of “moat” investing is precisely the kind of wealth generating investment that has made Warren Buffett a billionaire.
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since Phoenix Capital is NOT making ANY money for the past 2 years on its DOOM and GLOOM scenario, it is now turning to Warren Buffet to lift up its SALES !....
GOOD LUCK !!! LOL
Buffet recipe:
Daddy's money
Government assistance and inside connections
Compound interest
Tax avoidance
Which, works.
Add to that heavy investment early on in insurance companies at a time when there were really no major natural disasters, those holdings were his CASH COW. That money fueled his empire. Remember the cash banks and insurance companies have on hand by looking downtown and seeing all the big expensive skyscrapers built by them.
Buffet is a schmuck.
Buffett made BILLIONS on options. shorting and putting his way to riches off of Coke and many others....
The symbol KO alone should be tattooed on his ass......
He also made a bunch of money sucking at the tit of big fat USSA.
WTF with this article ???
MCD doesn't remotely have a moat. They have food and service that is now hideous compared to what it used to be.
After my local MCD (you want sumpfin'?) got my simple drive-thru orders wrong 5 out of 6 times, I fired their ass, replaced it with any of the ten other choices in the neighborhood, and have been back once in the past year (an emergency coffee, small).
Go talk to any VC firm and they will tell you what an economic moat (or, more commonly, "barrier to entry") is.
Yeah. Food is food. There is no barrier to entry. If MCD has a "moat" it is government subsidies to keep their food cheap. We already know they got bailout money in 2009. As far as we know, they get subsidized like farmers to keep their food below production cost.
Go to any town or city in the South or even other parts of the USA where there is a Chick Filet. They destroy McDonalds. MCD serves this fake slime that EBT users love. They can use their food stamp cards at Mickey Ds.
Indeed Freddie...spot on. I had a KFC multi-store owner for a client years back.
Chick Filet' has been around. They do swamp the competition most every where they are.
Of all the other FF shops and franchises, he feared them the most.
The local one here is in an AWFUL location for FF - awful. Yet it BANGS daily at lunch and dinner. Swamped.
I'd like to see a series, "How XYZ Became a Billionaire" going back to Rock-ur-Fellow, Kennedy and Carnegie.
It'd be edukational.
Buy John Stossel's books - dunno which one, but he goes into it - with some.
J Pierpoint Fucking Morgan - no matter how he got his fortune, is a motherfucker for the Fed - as all the Jekyll Island cunts....Warburgs...the fuckin huns....Rothchild's....cunts
54 billion euros "flew" out of Greece since the beginning of the economic crisis!
http://failedevolution.blogspot.gr/2014/01/54-billion-euros-flew-out-of-...
Feeding heavily from the gubmit trough. And other wise decisions along the way.
What do the initials GEICO stand for?
Geckos Eat I Can Oh
I know next to nothing about Buffet, but does anyone really think that over the past 50 years the powers to be have let him succeed without his cooperation with them?!
Or put more bluntly: the prettiest whore does more tricks.
Moat, shmoat
His investment style is "Applied Cronyism".
He uses power others don't have to gain access and deals no one else can get. Good deals if you can get it but don't pretend it is his investment skill.
Right.
Buffet got rich by applying the old addage, 'If you want to get rich, never invest your own money.' or something like that...
'If you want to get rich, never invest your own money.' or something like that...
Or make sure your daddy was a (Republican) senator who can tell young Warren the Democreep how to use Uncle Sam to make Warren rich.
Buffett became rich by using Govermment bailouts and his fathers influence as a Senator. You cannot bullshit everyone son.
This article was written by a McDonald's Fry Salter in La Mesa, California.
Yet, according to McDonald's own website, they advise their employees to stay away from fast food...
Even if it were good for you, and some of it is, it is not economical for their employees compared to certain other sources of food.
Now how Warren Buffet stayed a Billionaire - HE'S A CRONY CAPITALIST
Buffett’s Betrayalhttp://blogs.reuters.com/rolfe-winkler/2009/08/04/buffetts-betrayal/
Warren Buffett Is A Punkhttp://techcrunch.com/2012/05/12/warren-buffett-is-a-punk/
No prosecutions and he had his cake and ate it too because he also owned the majority of the ratings agency Moody's .
Not only is he a crony capitalist he's a hypocrite extroadinare!
How Buffett Saves Billions On His Tax Return
http://www.forbes.com/sites/greatspeculations/2011/08/17/how-buffett-saves-billions-on-his-tax-return/
Obama's pal Warren Buffett enriched again by govt; taxpayers lose" Yes, a cool one billion for the pro-Obama Super PAC Priorities USA Action." really pays off!
http://www.dailykos.com/story/2012/07/31/1115402/-Warren-Buffet-s-1-Bill...
Did the author forget that Buffett's father was a senator? From the start he was and still is the ultimate insider's insider
How is MCD a moat when fucking booger king builds stores right across the street? What a DUMB FUCK this author is.
People need to get over the idea that WB is some sort of benign national uncle.
'POP' - - - - the sound of the bursting of someone's bubble
and they bought all those "How Uncle Warren Got Rich & How You Can Too" books
Buffet sells premium and runs insurance companies - that's how he makes his cash - this horseshit about coca-cola, gilette and mcdonalds is a side show to distract the lemmings from the true way Warren makes his fortune
selling puts yes...by the thousands of contracts...and pile up cash quickly....part of Buffett's "genius" (cough cough) was knowing when to short/go long/sit out..and that was from huge insider info.
NO body is that good....reference Hillary Fucking Clinton's short tenure as a cattle trading cunt.....see: Tyson....
Where's the moat? Why not use an actual example from WBs holdings?
Not only that, where's the meat?
Coke...1973. "massive position...to hell with diversification." talk about "long clean drinking water." I've tasted the difference...the third world stuff will kill you. just make sure you use a straw (yes they have canning too.) since they recycle everything...as does the USA now...this is VERY efficient. costs about ten cents...and that's the real price even today save for the USA...or worse...Europe. these prices have collapsed already. the water is pretty much free. "trillion dollar budgets" say hello to scaled composites.
Smashburger menu beats the snot out of MCD menu.
I'll stick to small, independent family owned cafes and burger joints. They actually serve real food.
I don't think you'll ever get the snot out of the McD menu
BurgerFi is for people who don't want to spend less than $15 for a happy meal but also want diarrhea like they get at McD's.
This is the stupidest article ever and completely disregards the fact that the ENTIRE MONEY SUPPLY (AND PRICES AS SUCH) IS CONTROLLED AND MANIPULATED BY A FUCKING CARTEL. So nothing matters. NOTHING.
Lighten up, it's not quite that bad.
And the fries are pretty good.
That was actually this guys first good post -- keep'em like this one and I'll STFU.
Obviously MCD is not about food. It's a successful marketing campaign like Coca Cola.
MCD is a real estate company that sells shitty food on the side. Their founder even said so. He didn't say shitty food, but he admitted they didn't sell the best hamburger you could find.
Correct. Kroc famously said he sells burgers to pay the mortgages back when....he was right...MCD for franchisees..the elite of any local town, are fucking gold mines....
Why would MCD be about food? Food is not involved in their business.
such a wise investor...his main portfolio was full of companies that received billions in TARP bailouts...the bailouts that HE helped devise so that he wouldn't go tits up. He directly and indirectly received billions...cronyism all the way, and that's a big reason why he's a billionaire and the rest of "Main Street" America are continually falling into unemployment and poverty.
http://www.chron.com/business/article/Buffett-champion-of-bailout-is-als...
But oh, isn't he just so innocent when the state-run propaganda media only show Warren always smiling and eating his innocent little icecream cone wherever he goes? How could he ever be a corrupt scumbag because he eats icecream for all the sheeple to see....he must be good because he eats icecream.
Makes me sick and it should make every American sick as well.
He would have been destroyed if it weren't for TARP. He wouldn't have gotten where he was without inside gov't connections. He is not self-made like he pretends.
" He is not self-made like he pretends. "
Oh yes he is. But we little people usually refer to it as Theft.
Berhsire Hathaway. In memory of the compony he rode into the dirt.
And refining the selling out of American manufacturing to a fine point of maximum profitability.
Robber Baron's reincarnate.
Very good. Also, don't forget strumming his ukulele.
I'll have a party when this scumbag dies... Charlie Munger too.
Add George Soros to drop dead list.
...and by "Ukelele" you mean Becky Quick?
Sales Pitch - no moat.
MCD was the first mover and is well run. No Moat.
A moat is a structural barrier to market entry for potential competitors. Patents, rail line, pipelines etc. that can't easily be replocated are moats.
Moats don't equal growth but offer downside protection from competition. Moats allow for safe expansion and protection of profit margin.