Join        Login             Stock Quote

How Warren Buffett Turned A $13 Million Investment Into $2.1 Billion

 March 21, 2012 11:56 AM

Warren Buffett is the world's most successful investor. He's worth $44 billion and is the third-richest person on earth.

The investments made by his firm, Berkshire Hathaway (NYSE: BRK-B), gained 513,055% from 1964 to the end of 2011. The S&P 500, including dividends, gained 6,397% over the same time period.
Now, you may have seen these stats before. But let me ask you a question.

If you could jump in a time machine and meet Buffett in 1964, back when he was still rustling up money from a handful of private investors, would you take your checkbook with you?

Before you answer, ask yourself if you would have had the guts to make this type of investment:

In 1963, a small-time businessman named Tino De Angelis owned a company, Allied Crude Vegetable Oil. De Angelis would borrow money from a bank via a line of credit, buy shiploads of vegetable oil, store the oil in tanks on shore, sell the oil and then pay back the line of credit. The oil in the tanks was inspected regularly and was pledged as collateral for the line of credit.

Eventually, De Angelis figured out a way to outsmart the bankers who came by to check on the collateral. Instead of filling his ships with vegetable oil, he filled them with water and then pumped in a thin layer of oil on top. When the bankers sampled the load, they never reached below the oil floating on the top of the water. They thought the whole tank was filled with oil, as promised.

De Angelis used this "phantom oil" as collateral for more and more loans, borrowing more than $150 million (over $1 billion in today's dollars) against tanks of water. By the time the bankers finally caught on, the $150 million was gone.

The loss hit the banks hard. One bank in particular, American Express (NYSE: AXP), lost half its value due to the "salad oil scandal."

But a cagey investor from Omaha took notice of a great company selling at the fire-sale price of $35 per share -- and he loaded up on $13 million worth of AXP.

Consider: If you had followed Buffett's lead in 1964 when he made his first investment in American Express, you would have made a tidy 162,543% return today based on share price alone.

Next Page >>123


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.