Warren Buffett loves Coke and Dairy Queen, has lived in the same house for decades and only recently upgraded to a smartphone — in 2020.
Widely considered one of the best investors ever, a defining moment in Buffett’s career and one of his best investments ever came from a salad dressing scandal.
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In 1963, Allied Crude Vegetable Oil Refining Co. and its founder Anthony De Angelis were discovered committing fraud against 51 of the company’s creditors. Allied reportedly had oil supplies worth $150 million inspected and collateralized by their creditors. But these oil supplies were discovered to be nothing more than seawater with oil floating on top, so it looked like they were full.
In total, the company only had an inventory of roughly $6 million in oil.
One of its largest creditors, American Express Co. (NYSE: AXP), was looking at a massive loss on its loan, which caused its stock to fall by over 50%.
Buffett saw an opportunity. American Express was extremely profitable at the time but was poised to take a big hit. Buffett saw this as a way to get a profitable company at a steep discount and began buying up a massive 5% stake in American Express for roughly $20 million.
Following the purchase, as predicted, American Express began to rebound considerably over the following years and significantly outperformed the market. It grew to one of Buffett’s largest positions and roughly 40% of his entire portfolio near its peak.
From 1964 to 1968, the stock rose from the purchase price of 94 cents per share to about $5 when Buffett began selling the position and taking gains. To this day, American Express still makes up roughly 7% of Warren Buffett’s portfolio, and he now owns 20% of the company. While this wasn’t without its risks, it certainly paid off for the Oracle of Omaha.
What to know: While this seems like a once-in-a-lifetime opportunity, it’s not. It’s just about finding value, finding a good company, and committing.
One great place to do this can be the startup market. Startup investing is all about finding new and innovative companies and then holding them long-term as they appreciate in value.
For example, MaxTracker is a startup raising on StartEngine looking to pour gasoline on the Apple AirTag. It added GPS instead of Bluetooth, weatherproofing, 5G, one-year battery life, and a host of other features while sitting at a valuation of under $9 million.
Hundreds of startups are raising on StartEngine at any given time, so anyone can browse the site and find value of their own. These investments can be speculative and illiquid, so it’s important never to invest more than you can afford to lose.
See more on startup investing from Benzinga.
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Source: https://finance.yahoo.com/news/one-warren-buffetts-most-defining-134746760.html