The Easiest Way To Invest Alongside Warren Buffett
Every now and then, someone comes along who changes the way we see the world and how we live in it. Some of these people give us hope when we need it most, others offer guidance through difficult times, and some create new technologies that affect our daily lives.
From the great mathematician Euclid to visionary philosopher Socrates and even the modern technologist Steve Jobs, our world is molded by these people’s ability to influence, inspire and steer the masses for good.
We often don’t see their genius until after they’ve passed on. Fortunately, there’s a modern, living maestro whose name is synonymous with success around the world. He’s already been dubbed the “Oracle of Omaha” for his skill at interpreting the economy and social trends to inform his investing choices. His talents have made him the third-wealthiest man in America, and his words soothe even the most fragile investor’s mind.
Warren Buffett may be 85 years old, but he is sharp as a tack and has built a $360 billion empire around his company, Berkshire Hathaway (NYSE: BRK-B). This “sprawling conglomerate,” as Buffett calls it, owns a multitude of business from banks to real estate and even foodstuffs and beverages, with the defensive insurance business acting as the firm’s backbone.
And like many of the greatest motivators before him, Mr. Buffett knows how to put on a show and wow his audience. Each year, Berkshire Hathaway stages one of the most sensational annual meetings ever thrown, and this year promises to be no exception.
With his PT Barnum-like showmanship, Buffett uses these meetings to drum up excitement about the company and its future. His presence is much like that of Steve Jobs walking on stage to pitch Apple’s (Nasdaq: AAPL) latest and greatest products, only Buffett does his show behind closed doors to invitees (shareholders) only.
However, this year is different. The company has rented out one of the largest arenas in Nebraska for the record 45,000 to 50,000 people expected to attend. Berkshire will also live stream its annual meeting on Yahoo Finance for the first time, inviting the world in to see what’s going on “behind the curtain,” and getting many more regular investors involved in this great company.
At one point in time, it was nearly impossible for the average person to buy one share of the company (Berkshire “A” shares cost more than $218,000), let alone attend Berkshire’s annual meeting. But the introduction and recent split of Berkshire “B” shares, now trading near $146, combined with Berkshire’s newly accessible event makes an investment in the company more realistic and exciting for the masses.
You see, much like Apple’s famous product releases around September, Berkshire’s stock tends to bid up leading to its annual meetings in late April or early May.
For the past five years, BRK-B has posted an average return of 2.5% in the two weeks before the shareholder event.
The stock is already primed for a boost: Shares are trading with a price-to-earnings (P/E) ratio that’s in line with the five-year average, and the average analyst target is 14.5% above current prices for “B” shares. The at-capacity crowd and the event’s first year of streaming only add to the excitement and potential for a stock run.
Backed By History And Strong Fundamentals
Berkshire started in the mid-1800s as a textile firm making linings for men’s coats. By the 1960s, the share price had plummeted and Warren Buffett was the company’s largest shareholder.
He used his leverage and expertise to gain control of the company and immediately began to diversify, starting with insurance and adding dozens of companies that many of you use today. Companies like Kraft, GEICO, Duracell and so many more have been added to the Berkshire Hathaway family through either strategic, sizable investments or outright acquisition.
Berkshire’s diverse and strategic investment strategy make it a preferred vehicle in uncertain times. Actually, it has been a preferred vehicle through all market situations, outpacing the S&P 500 since the start of the new millennium.
We are at a time of great uncertainty in the markets. Even though shares have been rallying, plenty of risks abound. Berkshire is run more like a mutual fund than your typical company, though, so it has a lower risk profile than most stocks and, therefore, becomes more attractive in rough times.
Buffett’s active management helps ensure that Berkshire owns only the best and brightest companies.
In many ways, buying Berkshire Hathaway is like giving Buffett your money to manage personally. So, the difficult investment landscape only makes BRK-B more attractive, and the timing and new features of the upcoming annual meeting couldn’t be more perfect.
How To Dodge The Steep Price Tag
With the meeting and earnings report later this week, it’s the perfect time for a bullish trade.
As I mentioned, Berkshire’s Class B shares were created for people who wanted to invest in the company but couldn’t afford the six-figure price tag for Class A shares. While shares of BRK-A give holders slightly more in terms of voting rights, the two types trade nearly identical on a percentage basis — only one costs a fraction of the other.
But BRK-B still carries a triple-digit price tag, which puts it out of reach for some investors. The way around this is through options…
Buying a call option is similar to buying shares of a stock. In both cases, you are going “long” (bullish) on the company. In other words, you expect the share price to rise. But instead of buying the stock outright, you are buying a contract that gives you the right (but not the obligation) to buy the stock at a certain price at a future date. This allows you to enjoy all the upside of the stock with limited downside risk.
Options also allow you to leverage your position. So that average 2.5% move in BRK-B shares could actually be turned into a double- or even triple-digit gain in a matter of weeks.
However, as I looked into the best call option to buy, I was struck with an even better opportunity. As I said, we are at a time of great uncertainty in the markets, and even the Oracle of Omaha can’t predict something will rise with 100% certainty. So, I want to stack the odds further in my favor.
The way to do this is with a little-known Wall Street insider trick. This strategy allows traders to make a 12% gain in one month, or 151% annualized, even if BRK-B falls 2.4% (which history says is highly unlikely leading into the shareholder event).
If you want in on this Wall Street secret, I’ve put together a free presentation that will tell you everything you need to know. You can access it here.
This article originally appeared on Profitable Trading: The Easiest Way To Invest Alongside Warren Buffett