Insider Monkey
Warren Buffett and Corporate Insiders Love These Stocks
Ramish Cheema
8 min read

In This Article:

In this piece, we will take a look at the stocks that both Warren Buffett and insiders love. If you want to skip our introduction to Warren Buffett, his latest portfolio changes, and his firm, then take a look at Warren Buffett and Corporate Insiders Love These Stocks: Top 5 Stocks.

For anyone who even briefly follows the stock market, Warren Buffett is no stranger. His success in the stock market and the ability to pick out a handful of stocks among the thousands that change hands daily has made Mr. Buffett one of the richest people in the world. He makes his investments through the financial holding company Berkshire Hathaway. Berkshire's investments are not limited only to publicly traded companies. Instead, the firm also owns private businesses, and every quarter, it generates revenue from these investments.

The nature of Berkshire's income statements makes it necessary for the firm to take out sizeable stakes in at least some stocks that are part of its portfolio. This is because since Berkshire is not a hedge fund, it does not engage in traditional trading strategies such as leveraged puts or calls. Neither does it buy stocks simply to sell them later at a higher price. Instead, Berkshire's business model works by first investing in businesses that are revenue generators themselves, or sizeable and well established companies that can pay out dividends.

Berkshire Hathaway's investors have such a high amount of faith in Mr. Buffett and Charlie Munger that despite the fact that none of the dividends that are paid to Berkshire are paid to the shareholders, they continue to invest in the company. The dividends that Berkshire receives are sizeable too. Its financial statements show that during the first three quarters of 2023, Berkshire earned $4 billion through dividends, interest, and other income. In fact, two of Berkshire's biggest investments during the third quarter, namely the 915 million shares that it owns of Apple Inc. (NASDAQ:AAPL) and the 1 billion shares of Bank of America Corporation (NYSE:BAC) led to nearly half a billion dollars of dividends being paid to Mr. Buffett's investment firm in a quarter.

Safe to say, trust is a central element in Warren Buffett's business model. Berkshire's investors believe that he and Mr. Munger can invest their money better than they would be able to do so. Therefore, they primarily derive value from their investment through the shares of Berkshire Hathaway relative to the U.S. dollar. A sound investment strategy contributes to share price appreciation at percentage levels that are greater than bonds, the broader market, or other financial instruments can offer. As an illustration, consider the share price returns of Berkshire Hathaway Inc. (NYSE:BRK-A) and Berkshire Hathaway Inc. (NYSE:BRK-B). Over the past five years, a turbulent time period that has seen significant volatility in the stock market through a pandemic and then global geopolitical conflict, the S&P 500 index has gained 72.74%. The classes of Berkshire's shares, namely Class A and Class B, have gained 76.53% and 74.50%, respectively. This makes it clear that Berkshire's investors can do well even during stock market black swan events, and that the businesses that Mr. Buffett and his peers invest in end up performing better than a broader collection of stocks.

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