Legendary investor Warren Buffet is famous for his folksy wit and wisdom. In his 2004 chairman’s letter to shareholders of his Berkshire Hathaway conglomerate, he advised investors “to be fearful when others are greedy and greedy when others are fearful.”
Others may dote on his advice, but Buffett follows it — and the Wall Street Journal has totted up the value of the wisdom in that. It estimates that five years after investing in a handful of cash-strapped companies during the darkest moments of the 2008 global financial crisis and its aftermath, Buffett has pocketed returns of $10 billion “and counting.”
Buffett was lender of last resort to some storied U.S. corporate names who found themselves temporarily short of a buck: Goldman Sachs, Bank of America, General Electric, Mars’ Wrigley and Dow Chemical. He put $25.2 billion into them and reinsurer Swiss Re, the Journal reckons. Total dividend and premium income so far: $9.95 billion. By comparison, the U.S. government invested $420 billion in its TARP program on which it gained a return of $50 billion, or 12%.
True, any investor might have matched Buffett’s 40% return if they had bought stock in the six blue-chips that would rebound the most from their crisis lows. But Buffett has few peers when it comes to spotting opportunities like that. — to say nothing of the massive Berkshire cash pile he has access to. But his ability to make buys like that and his skill in knowing which companies to back is well captured by another of his bon mots, this time from his 2008 chairman’s letter: “Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” Doesn’t he just.