Berkshire Hathaway Inc. (BRK.B), Markel Corporation (MKL): Four Warren Buffett Myths Debunked

Page 1 of 2

As arguably the greatest investor of all time and one of the richest people on the planet, Berkshire Hathaway Inc. (NYSE:BRK.B) CEO Warren Buffett possesses an uncanny ability to gracefully endure having nearly every aspect of his life monitored, studied, praised, and ridiculed.

All too often, though, persistent Buffett-related misconceptions manage to spread among the masses, running almost entirely unchecked. Let’s pick apart a few of the most common myths, then, regarding the notorious Oracle of Omaha.

Myth No. 1: Buffett just got lucky

First, many can’t help but wonder whether Buffett simply got lucky in picking the right stocks.

After all, statistically someone had to get nearly everything right, so isn’t it possible Buffett’s stock picking prowess all comes down to an extraordinary case of serendipity?

hedge funds vs. mutual funds

But consider this: In June, 1942, Buffett bought his first stock at the age of 11. By the age of 14, using around $1,200 he earned from his paper route, Buffett bought 40 acres of Nebraska farmland, which he proceeded to lease out to merchant farmers.

Buffett turned 83 yesterday, which makes an incredible 72 years of methodically building his fortune not only through investing in the stocks of solid businesses over the long term, but also through taking deliberate steps to consistently earn the capital required to make those investments in the first place.

That’s why, over the better part of the last century, Buffett’s investing methods have been proven right over, and over, and over again. All told, in the nearly 49 years between 1964 and the first half of 2013, those methods have helped him grow Berkshire Hathaway Inc. (NYSE:BRK.B)’s book value by an incredible 631,415%.

Then again, Buffett has admitted to at least one form of luck, but not regarding his investing abilities.

In a letter he penned for the Giving Pledge organization he co-founded, he chalked it up to compound interest, “some lucky genes,” and being born in America, a country “that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions.”

Myth No. 2: Buy it like Buffett

Though Buffett is a great investor, that doesn’t mean we should all follow his lead, buying every stock he buys each quarter.

Remember, Buffett is working with a capital base so large most retail investors simply wouldn’t be able to fathom what to do with it.

And besides, more than a decade ago, Buffett himself admitted one of our greatest strengths as small investors is having less money, which in turn gives us access to a much broader investment universe he no longer enjoys.

As noted by Matt Koppenheffer, the author of The Motley Fool’s free special report “Warren Buffett’s Greatest Wisdom,” “When Buffett buys a stock, there’s a rush of everyone buying the exact same thing. But that misses the point. The Buffett lesson is to know certain areas really well and stick to your circle of competence, not just buy exactly what Buffett buys.”

In short, while you won’t go broke mimicking Buffett’s portfolio today, if you want to truly emulate his past successes, you’re better off doing your own homework and looking elsewhere.

Alternatively, you might consider picking up some shares of a “mini-Berkshire” business that employs almost exactly the same techniques Buffett used to create value for Berkshire Hathaway Inc. (NYSE:BRK.B) shareholders. Markel Corporation (NYSE:MKL), for example, is another insurer and financial holding company that’s currently about 1/40th the size of Berkshire. In addition, Markel Corporation (NYSE:MKL)’s president and CIO so happens to be noted value investor Tom Gayner. Best of all, Markel Corporation (NYSE:MKL) also happens to look incredibly cheap right now following its recent merger with fellow insurer Alterra Capital.

Myth No. 3: Buffett and his children live like billionaires
Next, many people wrongly believe Buffett and his family live like stereotypical rich folks, remaining out of touch with reality and taking advantage of their wealth to live extravagantly.

But while Buffett’s roughly $57 billion fortune is indeed staggering, remember he’s already given away around 204.62 million of his class B Berkshire Hathaway Inc. (NYSE:BRK.B) shares to charity, a stake worth around $22.7 billion based on the stock’s recent price of around $111 per share.

What’s more, late last year, Buffett confirmed he still drives a Cadillac he bought “around six or seven years ago,” and still lives in the relatively modest Omaha home he bought in 1958 for $31,500.

Warren Buffett's home

Warren Buffett’s Omaha home, Image Source: Wikimedia Commons.

In his words, he’s “never had any great desire to have multiple houses and all kinds of things and multiple cars.”

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!