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How the market affects Warren Buffett’s daily McDonalds order

Author: Brenton Schaeche/Wednesday, May 16, 2018/Categories: Mikes Blog

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While most of us make an effort to diversify our diet, one of the most consistently successful investors of all time is quite content to eat McDonald’s for breakfast just about every day.  

Not only that, but the “Oracle of Omaha” himself, Warren Buffett, tailors his breakfast order according to how the market fared the previous day, according to the HBO documentary Becoming Warren Buffett.

Here are the three options running through Buffett’s mind when he walks up to the counter:

If the market is down, Buffett will choose two sausage patties for $2.61.
If the market is neutral, Buffett will choose a sausage, egg and cheese biscuit sandwich for $2.95.
If the market is up, Buffett will choose a bacon, egg and cheese biscuit sandwich for $3.17.

“I tell my wife, as I shave in the morning, ‘Either $2.61, $2.95 or $3.17.’ And she puts that amount in the little cup by me here” Buffett said in the documentary.

Though it might seem like an oddity for a man worth an estimated $85 billion, this sort of thinking personifies Buffett, CEO of Berkshire Hathaway.

This insight into Buffett’s breakfast habits is perhaps just one clue into how he has built one of the most successful investment companies of all time. Many have tried to replicate Berkshire Hathaway’s continuous success over the years and many have failed to reach the returns gained by Buffett’s own value-investing philosophy.

The key to Berkshire Hathaway’s continuous success over the years can be boiled down to Buffett’s ability to methodically analyse companies to find undervalued stocks .

Therefore the detail-oriented penny-pinching at McDonald’s illustrates his investing philosophy.

It’s a philosophy that continuously allowed Berkshire to thrive. The company has decade-after-decade outperformed the market, which is no easy feat.

In fact, that particular issue has always been of interest to Buffett, which lead to his infamous bet in which he backed the S&P 500 to outperform a number of hedge funds, has recently come to an end.

Buffett has long taken issue with hedge funds‘ promises of outperforming the market and their high fees that take away from clients returns.

The results were quite conclusive, with the S&P500 final gain at 125.8%, beating out the 5 ‘funds of funds’ average return of 36.3%. During that same period, shares in Berkshire Hathaway were up 197.6%, again outperforming the market.

Buffett summarised in his annual letter to shareholders: “The five funds-of-funds got off to a fast start, each beating the index fund in 2008. Then the roof fell in. In every one of the nine years that followed, the funds-of-funds as a whole trailed the index fund.”

Buffett donated his winnings of approximately $US2.22million to Girls Inc. of Omaha, Nebraska, a nonprofit he has previously supported.

Whether it be fast food or investing, you can be confident Buffett has done his research. If you would like to find out how you can get international exposure to the hugely successful Berkshire Hathaway, you can learn more about an investment opportunity here.

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