Buffett's Wealth Over Time
Buffett was born in 1930, at the peak of the Great Depression. He showed business acumen as a child. At 11, Buffett started buying stocks. As a teenager, he filed his first tax return, delivered newspapers, and placed pinball machines in various stores. After graduating high school, Buffett bought a 40-acre farm in Omaha and earned $1,200 from pinball machines. Some stories recount that when he was young, Buffett once said, “I will be a millionaire by the age of 30. If not, I will jump off the tallest building in Omaha.” Below is the wealth that Buffett owned at different ages, along with the average income of American households. Let's see how much money Buffett made when he was your age now.
In His 20s: Earning His First $100,000
After graduating from college, Buffett worked as a stockbroker for his father's brokerage firm. When Buffett was 21, his net worth was only about $20,000. At 24, Buffett got a job from his mentor, Benjamin Graham, with a salary of $12,000 per year. According to the U.S. Census Bureau, this amount was three times the average income of an American household in 1954. By the time Buffett was 26, his net worth had increased to $140,000.
In His 30s: Becoming a Millionaire
At 30, Buffett's net worth reached $1 million. In 1960, the average income of an American household was $5,600 per year. At 35, his company was valued at $26 million. Buffett took control of Berkshire Hathaway in 1965, and by 1968, his company was valued at $104 million, with Buffett holding $25 million at age 39.
In His 40s: Facing Financial Issues
At 43, Buffett's net worth reached $34 million. The previous year, he had purchased See’s Candies for $25 million. This investment continued to yield profits for Buffett until 2015. However, the mid-1970s were a difficult time for Berkshire. In 1974, the company's stock plummeted, causing Buffett's net worth to drop to $19 million. By the late 1970s, the company's financial situation had recovered. Buffett owned assets worth $67 million at age 47. Meanwhile, the average income of American households was $16,530. 99% of Buffett's wealth came after he turned 50.
In His 50s: Becoming a Billionaire
Buffett's net worth in 1982 was $376 million and increased to $620 million in 1983. In 1956, at age 56, Buffett officially became a billionaire, while only earning a modest salary of $50,000 at Berkshire Hathaway. The average income of an American household in 1986 was $24,900 per year. Nearing 60, Buffett's net worth was $3.8 billion.
In His 60s: Both Berkshire and Buffett's Wealth Increased
In the 1990 Berkshire Hathaway shareholder letter, Buffett predicted that the company's assets would decline throughout the decade. In the first half of the 1990s, Buffett's prediction was correct. However, afterward, Berkshire's assets rebounded. At 66, Buffett's net worth was $16.5 billion. By the end of the 1990s, the average income of American households reached nearly $42,000 per year.
In His 70s: Charity and Growth
In just 6 years – from age 66 to 72, Buffett's wealth more than doubled. At 72, he held $35.7 billion. However, in 2006, the 'Sage of Omaha' announced that he would donate 85% of his wealth to 5 organizations. The average income of American households in 2000 was $42,148 per year.
In His 80s: No Limits
As of mid-August 2015, Buffett's net worth was $67 billion, making him the third richest person in the world after Bill Gates and Carlos Slim Helu. At 84, Buffett seems to have no intention of stopping. With his vast fortune, Buffett only takes a salary of $100,000 per year from Berkshire Hathaway and lives a modest life. Meanwhile, the average income of American households is currently around $51,939.
How Much Money Warren Buffett Made from Coca-Cola – An Unexpected Huge Figure!
One of Warren Buffett's greatest investments of all time is Coca-Cola (NYSE:KO), which happens to be the longest-held stock by Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B). No investment better illustrates the skill, patience, and innate ability of the Oracle of Omaha in the investment field than this deal. Warren Buffett first bought Coca-Cola shares in 1988, shortly after the famous Black Monday stock market crash in 1987. By the end of 1989, he purchased 23.35 million shares worth $1.8 billion. The book value of Berkshire Hathaway in 1989 was $4.9 million, meaning that Coke's shares accounted for 20% of Berkshire's net worth. It was a bold investment decision made after one of the most devastating market crashes in history. But it was Buffett's willingness to seize opportunities and embrace risk during turbulent times that made him a legend. Since the end of 1988, Coke's stock has increased by 1,750%. We will look at Buffett's history of buying Coke, the profits this stock has brought to Berkshire Hathaway, and his current perspective on this beverage giant.
Long-Term Investment is Best
Warren Buffett has hardly traded Coke stock since 1989. He increased Berkshire's holdings in Coca-Cola in 1994, raising the number of shares owned to 100 million at that time, but Buffett has never sold any of this company's shares. This stock has split twice since 1994, increasing Berkshire's holdings to 400 million shares. The cost basis of these shares is $1.299 billion. With the current stock price at $51.71 per share, Berkshire's investment is now worth $20.7 billion. This results in an unrealized profit of up to $19.4 billion. If dividends are included, the profit is even greater. At the current quarterly dividend payout of Coke at $0.4 per share, the 400 million shares that Berkshire owns will yield $640 million in dividend income next year. Since 1995, they have earned about $7 billion in dividends from their investment in Coke.
What Factors Influenced Buffett's Decision to Buy Coke Stock
Buffett was once enamored with PepsiCo, so his sudden decision to switch to Cherry Coke and then pour $1 billion into this stock in 1988 and 1989 must have shocked his family and friends. Certainly, those on Wall Street and outsiders were also shocked, as they had seen Buffett buy cheap media and industrial stocks in the 1970s. His specialty was seeking undervalued stocks from Benjamin Graham, who is considered a pioneer in value investing. In the 1988 shareholder letter, Buffett first mentioned his investment in Coke and presented his fundamental approach of buying large companies and holding them long-term. This method has inspired many to follow in his footsteps: “We expect to hold this stock for a long time. In fact, when we own shares of businesses with outstanding performance and talented management, we want to hold them forever.” In the 1989 shareholder letter, Warren Buffett elaborated on why he used such a high equity ratio to invest in Coca-Cola. He praised Roberto Goizueta – the CEO of Coke at that time, who was using excellent marketing and financial skills to help the company grow after a stagnant period in the 1970s.
One of the reasons Buffett decided to buy Coke in 1988 was that the brand had significant potential for international expansion and was trading at a modest valuation, with a price-to-earnings (P/E) ratio of about 15 times earnings in 1988. From 1989 to 1999, the company's earnings per share grew at a gross rate of 12% per year. Warren Buffett's investment in Coca-Cola shows that you don't need to be a math expert or have a high IQ to get rich from stocks. In a way, his investment in Coke is a typical investment method of Peter Lynch, the famous mutual fund manager, who advocated “investing in what you know.” Warren Buffett spent decades observing Coke and what made it such a great business. When he described in the 1989 shareholder letter, the brand first impressed him in 1936 when he bought 6 bottles of Coke for 25 cents, then sold them and made a small profit. In the letter, he wrote, “During my foray into this high-margin retail field, I observed the special appeal to consumers and the commercial potential of that product.”
Coke is Still Good, But Not Great Anymore
Although Warren Buffett still describes Coca-Cola as a “very good business,” he acknowledges that consumers turning away from sugary soda has impacted the company. In a 2018 CNBC interview, Buffett spoke about Coca-Cola, “It’s not as good as it was 5 or 10 years ago.” Coke has expanded into non-soda products, such as coffee and tea, to continue growing, but those products do not yield as high margins as focusing on the soda line. However, Buffett praised CEO James Quincey for finding ways for the company to continue selling more products to consumers each year. The company may not have the growth prospects it once did, but Buffett believes it has the best distribution system in the world, which will help the company as it ventures into energy drinks and introduces new products like Coca-Cola Plus Coffee (a blend of coke and coffee) to capture a new generation of consumers.