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In 2016, Warren Buffett’s net worth increased by $12 billion, which is more than anyone else in the U.S. Even as the latest technological developments increasingly dominate our lives, the old-school master again showed us how he got to be the 2nd richest man in the world. What is the takeaway for the average investor?
Invest in undervalued companies with sustainable competitive advantages. As Buffett said, “In business, I look for economic castles protected by unbreachable moats.”
Even as Buffett’s firm Berthshire Hathaway took it on the chin this year with its investment in Wells Fargo, his position in the Kraft Heinz company went from $23.6 billion to $28.5 billion so far in 2016. Yes, BRK made almost $5 billion from that position alone. The dominant brands owned by Kraft Heinz reliably fetch premium prices and maintain a sustainable competitive advantage. KHC almost doubled the return on large cap stocks in 2016.
Berkshire’s position in IBM was another winner with a increase in value of $2.4 billion. IBM successfully transitioned out of the commoditized hardware business into high margin IT consulting and business services, which involve sticky contracts and reoccurring revenues.
Even though Buffett famously supported Hillary for president, BRK’s stake in Goldman Sachs has skyrockets since the election with prospect of rollbacks in financial regulations.