Berkshire Hathaway Inc. (BRK.B): Warren Buffett’s Best Investment Ever

Published on May 2, 2013 at 1:03 pm by The Motley Fool in Hedge Funds

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Robert Eberhard: There are plenty of choices available when considering Buffett’s best investment ever. However, I’m going to look beyond companies he’s purchased, and talk about the investment he made in himself nearly 60 years ago.

Buffett was a great admirer of Benjamin Graham and David Dodd, two investment analysts who had great success, even during the Great Depression. Because of this admiration, Buffett left the comfort of Omaha in 1950 and went to New York, to study under both at Columbia Business School. He graduated with a degree in economics, and returned to Omaha to work for his father as a stockbroker.

Columbia was only part of the investment Buffett made in himself, however. Graham soon offered Buffett a position at the Graham-Newman partnership. For nearly two years, Buffett learned at the hip of one of the most successful investors ever, eventually returning to Omaha to start up his own investing partnership when Graham closed his down. It’s hard to say if Buffett would be as successful today without three years of mentorship from Ben Graham, but I’m sure that it didn’t hurt.

Dan Caplinger: Buffett’s best investments have taken full advantage of his reputation, and the impact his moves have on the investing community. My pick for the top candidate is one that hasn’t yet fully paid off: His $5 billion investment in Bank of America Corp (NYSE:BAC) back in late 2011.

At the time, B of A was struggling under the market’s perception that it needed to raise capital and, despite its denials to the contrary, the bank needed to make a move to gain confidence. With Buffett having made similar moves during 2008 with other blue-chip companies exposed to the financial crisis, it was a natural fit for Bank of America Corp (NYSE:BAC) to go to him. Preferred stock yielding 6% is quite a bit more attractive than the 0.3% yield that common shareholders are getting right now, but the real clincher was the equity kicker Buffett got in the form of 700 million 10-year warrants — warrants that he can exercise at a price that’s now $5 less than the prevailing market price. These deals aren’t without risk, but Buffett gets terms that make them attractive despite the risks involved.

Chuck Saletta: Beyond a shadow of a doubt, Buffett’s best ever investment is the very company he has called his worst investment — Berkshire Hathaway. While it’s absolutely true that on a rate-of-return basis, Berkshire Hathaway Inc. (NYSE:BRK.B)’s textile mills were a lousy investment for that otherwise master investor, that investment did give Buffett his position as CEO of an operating company.

There’s a famous Buffett quote painted on a conference room wall at Fool Headquarters: “I am a better investor because I am a businessman, and a better businessman because I am an investor.” Were it not for the Berkshire Hathaway Inc. (NYSE:BRK.B) acquisition that made Buffett not only an investor, but the CEO of an operating company, he may never have gotten that cross-training experience. On a dollars-and-cents basis, it may have been a lousy investment, but from an educational perspective, it was unbelievably valuable.

The article Warren Buffett’s Best Investment Ever originally appeared on Fool.com and is written by Matt Koppenheffer.

Fool contributor Dan Caplinger owns shares of Berkshire Hathaway. Dan Dzombak owns shares of Bank of America. Fool contributor John Divine owns shares of Berkshire Hathaway. Fool contributor Robert Eberhard owns shares of Berkshire Hathaway. Fool contributor Chuck Saletta owns shares of Bank of America. Matt Koppenheffer owns shares of Berkshire Hathaway and Bank of America.The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Bank of America and Berkshire Hathaway.