Named one of the greatest investors of all time and the “Oracle of Omaha”, Warren Buffett earned the role of CEO and chairman of Berkshire Hathaway. His wealth status varies parallel to the changes of the market, but in 2016 was named the second richest person in the world.
Buffett gained his fame by perfecting the art of value investing, which in short relates to those who buy undervalued stocks at a low cost and sell them higher. Growth investors, on the other hand, buy stocks in companies that have strong earnings.
No Strategy Is Necessarily Better, but in a Good Standing Economy, Growth Investors Take the Lead, and in Times of Turmoil, Value Investors Come Out Stronger.
1997 was the year that Buffett started his silver investing journey – an undervalued asset with intrinsic value? What more could you ask for? He believed in silver so much so that Berkshire Hathaway ended up holding 37% of the world’s silver from 1997 to 2006.
A silver bull nonetheless, Buffett held more of this precious metal than COMEX itself. His reason for investing so heavily in silver? A game of supply in demand. In a press release published by Berkshire, speaking of Buffett directly said:
“Over 30 years ago, Warren Buffett, CEO of Berkshire Hathaway, made his first purchase of silver in anticipation of the metal’s demonetization by the U.S. Government. In recent years, widely-published reports have shown that bullion inventories have fallen very materially, because of an excess of user-demand over mine production and reclamation.”
What Buffett is referring to here when he mentions the metal’s demonization by the U.S government is Nixon taking us off the gold standard. This in turn is what started Buffett’s silver buying spree, making everyone turn their heads and wonder why he did such a thing, as he was, after all, a value investor. His reasoning? An imbalance between silver supply and demand was bound to reflect itself in higher prices down the road.
2006 Rolled Around and the Silver Exchange Traded Fund (Slv) Backed by Barclay’s Was Attempting SEC Approval but Needed Actual Silver to Back Up the Shares.
Barclay’s then purchased around 130 million silver ounces because of the metal’s low supply on the market- just about the total of what Berkshire had at the time.
His most controversial move involving silver was selling it too soon. He sold all of his shares at $7.50 while he bought in at $6 per ounce. Many of those interested in the investor world were left shaking their heads, and Buffett himself as well. Silver soon after nearly doubled in price, proving that he made a move too soon.
When asked about this move, Buffett said:
“We had a lot of silver once, but we don’t have it now—and we didn’t make much on our prior holdings.”
“I bought early and sold early. Silver was my fault. Speculation is wildest at the end.”
Selling too early is rarely a move Buffett makes, but with silver, it’s a different story.
All in all, regardless of whether Buffett held or sold, he still saw the intrinsic value of silver & of investing in it to turn a profit. Silver is a solid hedge against inflation, has a finite supply, and is a diversifying asset to hold in your portfolio.
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