How To Invest Like Warren Buffett

March 6, 2012 by staff 

How To Invest Like Warren Buffett, Warren Buffett has long been resistant to gold fever, frequently dismissing the yellow metal as an investment because it produces no income, most recently bad-mouthing the asset in his annual Berkshire Hathaway shareholder letter.

At least one gold backer is returning fire though. Chris Goolgasian, a senior portfolio manager at State Street Global Advisors, which oversees the $69.9 billion SPDR Gold Trust exchange-traded fund, pointed out in a recent report that Buffett’s disdain for the metal hardly disqualifies it as a big winner for investors.

In a piece titled “In Gold We Trust?,” Goolgasian runs through the various reasons why investors might want to hold gold before coming back to the Oracle of Omaha’s central criticism. (That criticism in brief: the world’s entire current gold stock, worth around $9 trillion, will deliver nothing to its owners over time, while a collection of assets worth the same — say 400 million acres of U.S. cropland and 16 Exxon Mobilswould produce valuable resources and trillions in dividends.)

“[Buffett] points out that [gold] has no earnings, yield or way to return cash to the investor,” he writes. State Street admits as much, Goolgasian continues, but “that doesn’t mean one can’t make money in gold.”

The piece makes the valid argument that just because Warren Buffett doesn’t like an investment does not make it a foolish bet. “While he won’t own gold, he also never owned Apple (up around 1,500% since January of 2000) or Google (up 530% since August of 2004) or shorted subprime mortgages,” Goolgasian says, before noting that Berkshire’s 105% gain since January 2000 pales in comparison to gold’s “nearly five-fold” gain over the same period.

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