The first national radio network in the United States was formed on Sept. 9, 1926, when RCA — in conjunction with General Electric Company (NYSE:GE) and Westinghouse Electric — established the National Broadcasting Company. In a press release announcing the new network, RCA noted that there were then 5 million homes equipped with radios and perhaps 21 million homes without one. NBC would help expand the distribution of “programs of the highest quality,” and RCA admitted that it would need the public’s support to have any chance of success in a largely untried format:
We have no hesitation in recommending the National Broadcasting Company to the people of the United States.
It will need the help of all listeners. It will make mistakes. If the public will make known its views to the officials of the company from time to time, we are confident that the new broadcasting company will be an instrument of great public service.
This pioneering radio network was made possible by a deal struck between RCA and AT&T Inc. (NYSE:T), in which the radio manufacturer spent $1 million (worth a comparatively minuscule $13 million today) to buy out the telephone company’s test-bed WEAF broadcast station, located in New York City. This solved two problems: RCA badly wanted to expand its broadcast network, and AT&T Inc. (NYSE:T) felt that focusing on expanding telephone access would be the key to its future. In the process, RCA gained access to AT&T Inc. (NYSE:T)’s high-quality (for the time) telephone lines for long-distance transmissions, solving the problem it had previously had with transmission over weaker telegraph wires. Radio finally had the bandwidth to go national.
NBC launched in November of 1926, and by 1927 it had already been divided into two “networks,” branded as Red and Blue, which provided separation between entertainment programs and news or cultural broadcasts. By the spring of 1927, NBC had gone truly national with the launch of the Orange network on the West Coast. A year later, RCA became the first and only true radio-focused company to join the Dow Jones Industrial Average in an index restructuring that expanded the Dow to 30 stocks. Westinghouse Electric also joined the Dow at this time, making it the only time in Dow history that the three companies most directly responsible for the spread of radio were on the index at the same time.
The network continued to expand despite the onset of the Great Depression, but at the tail end of the 1930s RCA’s dominance of American broadcasting drew the attention of antitrust regulators. RCA lost its final appeal before the Supreme Court in 1943 and was forced to divest one of its two major networks (the Blue network), which became the American Broadcasting Company in 1945.
Warren Buffett never mentions this but he is one of the first hedge fund managers who unlocked the secrets of successful stock market investing. He launched his hedge fund in 1956 with $105,100 in seed capital. Back then they weren’t called hedge funds, they were called “partnerships”. Warren Buffett took 25% of all returns in excess of 6 percent.
For example S&P 500 Index returned 43.4% in 1958. If Warren Buffett’s hedge fund didn’t generate any outperformance (i.e. secretly invested like a closet index fund), Warren Buffett would have pocketed a quarter of the 37.4% excess return. That would have been 9.35% in hedge fund “fees”.
Actually Warren Buffett failed to beat the S&P 500 Index in 1958, returned only 40.9% and pocketed 8.7 percentage of it as “fees”. His investors didn’t mind that he underperformed the market in 1958 because he beat the market by a large margin in 1957. That year Buffett’s hedge fund returned 10.4% and Buffett took only 1.1 percentage points of that as “fees”. S&P 500 Index lost 10.8% in 1957, so Buffett’s investors actually thrilled to beat the market by 20.1 percentage points in 1957.
Between 1957 and 1966 Warren Buffett’s hedge fund returned 23.5% annually after deducting Warren Buffett’s 5.5 percentage point annual fees. S&P 500 Index generated an average annual compounded return of only 9.2% during the same 10-year period. An investor who invested $10,000 in Warren Buffett’s hedge fund at the beginning of 1957 saw his capital turn into $103,000 before fees and $64,100 after fees (this means Warren Buffett made more than $36,000 in fees from this investor).
As you can guess, Warren Buffett’s #1 wealth building strategy is to generate high returns in the 20% to 30% range.
We see several investors trying to strike it rich in options market by risking their entire savings. You can get rich by returning 20% per year and compounding that for several years. Warren Buffett has been investing and compounding for at least 65 years.
So, how did Warren Buffett manage to generate high returns and beat the market?
In a free sample issue of our monthly newsletter we analyzed Warren Buffett’s stock picks covering the 1999-2017 period and identified the best performing stocks in Warren Buffett’s portfolio. This is basically a recipe to generate better returns than Warren Buffett is achieving himself.
You can enter your email below to get our FREE report. In the same report you can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12-24 months. We initially share this idea in October 2018 and the stock already returned more than 150%. We still like this investment.
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