Chief Investment Strategist, The Freeport Society
The trick is timing your exit right.
It’s something many of the world’s greatest athletes, actors, and musicians have wrestled with.
Now, it’s Warren Buffett’s turn…
At 94, he’s announced that he’s handing over the reins of his investment firm, Berkshire Hathaway, to his long-time lieutenant.
Talk about a great run…
Buffett took control of Berkshire Hathaway in 1965 when it was a failing New England textile mill.
He turned it into a $1.1 trillion global conglomerate – with interests in everything from insurance to railroads to ice cream.
Over that time, the company grew its profits by 5,500,000%.
Thanks to that extraordinary run, Buffett became the sixth-richest person in the world, with a net worth of $168 billion. And at least seven other investors and partners who stuck with him over the years are also now billionaires.
Alas, I’m not a Berkshire billionaire (more on that below).
But I am proud to say that the company was a founding position of our flagship Freeport Investor advisory.
I recommended Berkshire when we launched the service, in December 2023.
Readers who bought in then are up 50% – or about twice the return of the S&P 500 over that time.
And that’s not the only way we’ve piggy-backed on Buffett’s brilliance.
As we’ll look at today, one of the best performing investing strategies in Freeport Investor comes straight out of the Buffett playbook.
It’s something we call the Rich Man’s Super Currency.
And as you’ll see today, it’s one of the surest, steadiest ways to build wealth as an investor.
Growth at a Reasonable Price
Buffett is known as a value investor.
But in his 1989 letter to shareholders, he warned against buying shares in companies that have run into trouble and are selling for bargain prices as a result…
Unless you are a liquidator, that kind of approach to buying businesses is foolish.
First, the original “bargain” price probably will not turn out to be such a steal after all. In a difficult business, no sooner is one problem solved than another surfaces – never is there just one cockroach in the kitchen.
Second, any initial advantage you secure will be quickly eroded by the low return that the business earns.
Buffett ditched this kind of investing and went instead with something the MBA crowd calls “growth at a reasonable price.” Or as Buffett put it…
It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
That’s exactly the approach we’ve taken in Freeport Investor with our Rich Man’s Super Currency strategy.
It’s our way of describing investing in elite businesses that generate consistent cash flows.
We call these stocks the Rich Man’s Super Currency because these businesses compound profits over decades and pay out reliable, extremely safe income to their shareholders.
That’s why so many of the world’s high-net-worth individuals own them – including Buffett.
So, what do these Rich Man’s Super Currency businesses look like?
Elite Business Share These Five Common Traits
There’s no set definition of an elite business. But they share a handful of common traits…
1. A durable competitive advantage
Walmart has a durable competitive advantage because its huge global distribution network allows it to sell goods at unbeatable low prices.
It’s extremely difficult for smaller firms to compete against that.
2. An outstanding brand name
Coca-Cola, a Buffett favorite, is a good example. Its logo is recognized across the world, and people associate it with quality soda. It looks and feels like America.
That’s a competitive advantage virtually impossible for competitors to overcome.
3. The largest business in its industry
When you run your business better than the competition, you can’t help but become the biggest.
McDonald’s didn’t become America’s biggest fast-food chain because it made the best hamburgers. Let’s face it, the burgers are mediocre at best. It did it by running a better business than its competitors.
4. Sells everyday products
An elite business sells products we use almost every day. Think food, oil, soda, medicine, coffee, energy drinks, smartphones, beer, mouthwash, razor blades, and deodorant. These things don’t go out of style.
5. Sells habit-forming, addictive products
Look at the list of the 20 best-performing U.S. stocks from 1957 through 2003. You’ll see that many of them sold habit-forming products.
Phillip Morris is at the top of the list. This cigarette company was the top-performing S&P 500 stock from 1957 to 2003.
Fortune Brands, once called American Brands, is also on the list. It sold cigarettes and alcohol.
PepsiCo and The Hershey Co. are on the list, too. They sell sugar and chocolate and caffeine – all addictive!
Many drug companies are on the list as well. They include Abbott Labs, Bristol-Myers Squibb, Merck, and Pfizer. People get accustomed – even addicted – to taking medicinal drugs.
And so far, the Rich Man’s Super Currency stocks in the model portfolio are doing great… despite the recent stock market wobble over tariffs.
Inflation? Deflation? Who Cares?
I’ve made seven Rich Man’s Super Currency recommendations over the past year and a half.
So far, we’re up an average of 29%.
And I’ve no intention of selling.
These are businesses that have proven their ability to navigate inflation, deflation, and everything in between.
They’ve prospered through wars and pestilence and through all manner of imbecilic governmental missteps.
They’ve proven themselves to be future proof – meaning they’re able to navigate new technological developments without becoming obsolete.
I can’t share the names of all the Rich Man’s Super Currency stocks I’ve recommended at Freeport Investor here out of respect to my paying subscribers.
But you can get some of the benefit of this approach through the Vanguard Dividend Appreciation ETF (VIG).
It’s a collection of quality American businesses with a history of consistently raising their dividends. To make the cut, a company has to have a string of at least 10 consecutive years of raising their payout.
Accounting figures can be manipulated. But you can’t fudge cold, hard cash. And VIG is full of quality companies with a long history of delivering the goods.
To life, liberty, and the pursuit of wealth,
Charles
P.S. While Buffett will no longer be the CEO of Berkshire, he’s staying on as Executive Chairman.
Some men never retire. It’s not in their DNA.
My grandfather was like that. He tried retirement once – selling his auto-glass business and settling into a quieter life. A month later, he bought his company back and ran it until the end.
Buffett is cut from the same cloth.
I expect the man will die at his desk, Cherry Coke next to him, an annual report of some company still clutched in his hand.
Still, as he “slows down,” it’s as good a time as any to reflect on his achievements.